Riyadh — In a landmark decision that aligns the Kingdom’s financial exchange with global standards, Saudi Arabia’s Capital Market Authority (CMA) has announced the removal of key restrictions on foreign investment. Set to take effect on February 1, this move is projected to trigger a significant wave of capital inflows and reshape the region's liquidity landscape.

Here is what investors need to know about the regulatory changes and where institutional experts see the "smart money" moving.

The Core Policy Shift

On January 6, the CMA announced the abolition of the Qualified Foreign Investor (QFI) framework, which previously required a minimum of $500 million in assets under management (AUM) for entry. Additionally, swap agreements have been eliminated.

Why it matters: This deregulation democratizes access, allowing institutional and private investors direct entry into listed Saudi companies. Kapil Chadda, partner at Arthur D. Little, notes that this move effectively places Saudi Arabia on "equal footing with other competitive emerging markets such as Brazil, India, and China."

1. Liquidity & Index Weighting: The "Alpha" Signal

The immediate impact of this reform is expected to be a surge in liquidity and a re-rating of the Saudi market in global indices.

• Inflow Projections: Hamza Dweik, head of trading at Saxo Bank, projects the reform will unlock $9 billion to $10 billion in new inflows. This builds upon the SR519 billion ($138 billion) already held by foreign investors as of Q3 2025.
• Index Impact: Dweik further highlights that increased participation is expected to raise Saudi Arabia’s weighting in global emerging-market indices from approximately 3.2% to 4.7%.
• Market Depth: A broader investor base will deepen liquidity in a market that Saxo Bank notes is already valued at over SR3 trillion.

2. Sectors to Watch: Where Experts Are Looking

Analysts have identified specific sectors likely to benefit most from the influx of foreign capital, driven by Vision 2030 priorities and fundamental growth.

Banking & Financials:

Vijay Valecha, chief investment officer at Century Financial, identifies large-cap banks with high adjusted free floats as prime targets. He points out that previous limitations constrained their MSCI weighting, making institutions such as Al Rajhi Bank(1120.SA), The Saudi National Bank(1180.SA), and Alinma Bank(1150.SA) likely beneficiaries.

Energy & Heavyweights:

According to Amol Shitole, head of fixed income at Mashreq Capital, initial demand will likely concentrate on index heavyweights due to their liquidity and benchmark relevance. Valecha adds that international funds can now buy Saudi Arabian Oil Co.(2222.SA) shares directly, broadening the energy giant's investor base.

High-Growth Sectors (Tech, Healthcare, Green Energy):

Sectors aligned with Vision 2030—including digital transformation, green hydrogen, and healthcare—are expected to outperform. Saxo Bank’s analysis projects petrochemical profits to rise by 74% in 2025, while healthcare earnings are forecast to grow by 23%.

Infrastructure & Tourism:

Tony Hallside, CEO of STP Partners, and Century Financial’s Valecha agree that mega-events like the 2029 Asian Winter Games, 2030 World Expo, and 2034 FIFA World Cup will attract long-term capital to infrastructure and tourism stocks.

3. The 2026 Outlook: A "Systemic Bull Trend"

Market sentiment for the coming year is overwhelmingly positive, supported by technical and fundamental indicators.

• Bullish Consensus: Following the announcement, all 20 sector indexes moved higher on January 7, with 212 listed stocks advancing. Century Financial predicts a "systemic bull trend" in 2026 as historic pricing impediments are finally removed.
• Growth Forecast: Saxo Bank analysts forecast mid-single-digit earnings growth and a 5–10% increase in trading volumes in 2026, stabilized by the incremental foreign liquidity.

4. Risk Monitor: What to Watch Out For

While the outlook is positive, experts urge investors to remain vigilant regarding specific structural and regulatory factors.

• Ownership Caps: Dweik reminds investors they must still navigate ownership limits, currently set at 10% per investor and 49% aggregate foreign holding.
• Governance Focus: Chadda emphasizes that transparency and the protection of minority shareholder rights remain crucial. He advises investors to screen for companies with high governance standards to avoid risks like insider trading.
• Macro Dependency: Shitole cautions that long-term performance will ultimately hinge on government spending and oil price dynamics, rather than market access mechanics alone.