Core Insights - Saudi Arabia's benchmark stock index TASI surged by 5%, marking the largest single-day increase since 2020, driven by expectations of potential easing of foreign ownership limits [1] - If the policy is implemented, Saudi Arabia's stock market could attract nearly $10 billion in new foreign investment [1] - Al Rajhi Bank's stock price rose by 10%, reaching its maximum allowable daily increase, while Saudi National Bank also saw a 10% increase, the largest since its listing in 2014 [1] - Two ETFs in the Saudi market experienced gains exceeding 6%, reflecting strong investor enthusiasm for foreign capital inflow [1] Regulatory Changes - The Saudi Capital Market Authority (CMA) currently restricts foreign investors to a maximum of 49% ownership in any listed company, but is nearing an agreement to relax this limit [1] - CMA board member Abdulaziz Abdulmohsen Bin Hassan indicated that the policy could be effective by the end of the year [1] - The exact percentage of foreign ownership that may be allowed remains uncertain, but any adjustment above 50% would be significant for international investors [1] Market Impact - Franklin Templeton's Sara Shamma noted that lifting foreign ownership limits could release over $10 billion in passive funds and lead to significant weight adjustments in MSCI and FTSE indices, potentially increasing Saudi Arabia's weight in emerging market indices by nearly 100 basis points [2] - Currently, Saudi Arabia's market capitalization of $2.3 trillion accounts for 3.3% of the MSCI Emerging Markets Index [2] - Despite positive sentiment regarding potential policy changes, the sustainability of the Saudi stock market's performance depends on fundamental market conditions and overall economic outlook [2] - The Saudi stock market has faced challenges this year, previously declining nearly 10%, making it the worst-performing market in the Middle East, while the MSCI Emerging Markets Index has risen by 25% [2]

Core Viewpoint - Saudi stock market experienced a significant surge of approximately 5% on September 24, with a total market capitalization increase of $123 billion, driven by the announcement of easing foreign ownership restrictions [1][4]. Group 1: Market Reaction - The Saudi Capital Market Authority (CMA) plans to relax foreign ownership limits, potentially allowing foreign investors to hold more than 49% in listed companies, which is expected to attract billions in foreign investment [4][6]. - All sectors in the Saudi market saw gains, with banking stocks reaching record highs, particularly a 9% increase in Saudi bank shares [4]. Group 2: Investment Projections - JPMorgan estimates that if the CMA raises the foreign ownership limit to 100%, it could lead to an influx of $10.6 billion in foreign capital [6]. - Al Rajhi Bank's stock surged by 10%, with projections indicating it could attract $5 to $6 billion from foreign investors, making it one of the biggest beneficiaries of the potential changes [6]. Group 3: Implications for Market Indices - The easing of restrictions is expected to enhance the weight of Saudi stocks in the MSCI benchmark, with projections suggesting an increase from approximately 3.3% to around 4% in the MSCI Emerging Markets Index [7]. - Companies with the highest foreign ownership in Saudi Arabia include Tawuniya, Rasan, and Etihad Etisalat (Mobily), with foreign ownership percentages ranging from 20% to 25% [7].