Core Viewpoint - Saudi Arabia's stock market experienced its largest daily increase since 2020, driven by expectations that the market regulator may relax foreign ownership limits on listed companies, potentially revitalizing interest in the stock exchange [1][4]. Group 1: Market Reaction - The Saudi benchmark index surged over 5%, reaching its highest level since May, following reports of potential regulatory changes [1]. - The index has seen a year-to-date decline of 9.6%, underperforming regional markets such as Dubai and Kuwait, which are up 13.8% and 20% respectively [3]. Group 2: Potential Inflows - If the foreign ownership cap is lifted to 100%, it could attract an additional $9.5 billion to $10 billion in passive inflows from MSCI and FTSE index trackers, according to UBS projections [2]. - The easing of foreign ownership rules is expected to enhance the weight of Saudi public companies in major indexes, thereby increasing foreign investment [4]. Group 3: Market Liquidity and Participation - The anticipated regulatory changes are expected to strengthen liquidity and depth in the Saudi market, tighten bid-ask spreads, and expand institutional participation [5]. - Saudi Arabia has been actively working to attract foreign investors through various initiatives, including establishing exchange-traded funds with partners in Asia [5]. Group 4: Broader Regulatory Context - In January, regulators allowed foreigners to purchase shares in companies owning real estate in Mecca and Medina, while maintaining restrictions on direct land ownership [6].