The fund management house noted that the change comes as the Middle East nation cultivates a number of IPOs, part of a 2030 reform programme.

Saudi Arabia’s liberalisation of investment into its stock market will boost the sector but is not a “game changer” for its capital markets, a fund manager argues.

The Kingdom, as reported here, announced that it is opening doors to non-resident foreign investors into the economy, taking effect from 1 February. The country wants the change to boost its $2.3 trillion equity market.

“Saudi Arabia’s latest liberalisation move in eliminating the Qualified Foreign Investor (QFI) designation and opening the main market to all non-resident investors, marks a meaningful evolution in the Kingdom’s capital-markets framework,” Alay Patel, co-portfolio manager of Barings Emerging EMEA Opportunities, said in a note yesterday.

“By materially lowering entry barriers and simplifying market access, the reform should enhance liquidity, broaden the investor base, and support a higher weighting for the Tadawul in global indices such as MSCI Emerging Markets index,” Patel continued.

Investors will hope that Saudi Arabia’s stocks – classed as “emerging market” – will improve their fortunes this year. The Tadawul MT30 stock market benchmark fell 13.69 per cent in 2025. Over five years until end-2025 they rose 19.7 per cent.

The manager noted that Saudi Arabia’s move comes as the jurisdiction cultivates a “robust” pipeline of initial public offerings, shaped by its Vision 2030 economic reform agenda.

“However, the more significant implications lie in what this could signal: A precursor to further liberalisation, most notably the eventual removal of foreign ownership limit (FOL) rules,” Patel said. “That would be the true catalyst for driving substantial liquidity through passive foreign inflows.”

Patel cautioned that the investment trust does not think the change to the rules is a “transformational” step for entities such as the Tadawul stock index.

Oil prices are, for example, trading in the “$60s” and below Barings’ estimated fiscal breakeven near $100. The Kingdom faces a widening fiscal deficit and has already begun cutting capital expenditure. Institutional investors were already able to take part in the market under the older framework, so the impact of liberalisation should be relatively modest. Local retail investors can earn comparable returns through time deposits, limiting immediate domestic participation, Patel said.

“The Tadawul’s subdued average daily trading volumes and its position as one of the poorest performers in emerging markets in 2025 highlight ongoing investor caution.

“In conclusion, while this reform is a welcome and necessary step in modernising Saudi Arabia’s capital markets, it is not a game changer on its own. Meaningful transformation will require further reforms, particularly a full relaxation of foreign ownership limits to unlock the next phase of foreign participation and liquidity,” Patel concluded.