Higher foreign ownership cap in TASI to reshape index weights, lift key stocks

Tadawul trading screen

In this report, Argaam tracks the potential impact of the Capital Market Authority’s (CMA) planned decision to lift the foreign ownership cap in Saudi-listed companies beyond the current 49% threshold, with implementation expected before year-end, pending government approvals.

Excluding Saudi Arabian Oil Co. (Saudi Aramco), foreign holdings are currently estimated at SAR 369.4 billion (11.77%) of the market capitalization.

The plan to lift foreign investors’ ownership cap in the Main Market (TASI) to as much as 100% aims to cater to global investor needs. It should also help to boost the benchmark index weight in Morgan Stanley Capital International (MSCI) and Financial Times Stock Exchange (FTSE), where it now makes up more than 4% and is set to witness a remarkable hike once the planned decision takes effect.

Relaxing ownership rules is expected to increase the Saudi market’s relative weight, driving automatic inflows from index-tracking funds.

The move is deemed a turning point for the Foreign Inclusion Factor (FIF), as index methodologies use the lower of free float or foreign ownership limits. With the cap set at 49% at present, many corporate weights are constrained even when free float exceeds 80%-90%.

This has kept weights below potential, but lifting the ceiling to 100% will allow FIF to reflect the full free float, effectively doubling index weights and triggering direct capital inflows. The market could attract $9.5-$10 billion in fresh investments.

Al Rajhi Bank stands out as the biggest beneficiary, with a 97.8% free float and foreign ownership of 14.6%. Its index weight is currently capped at 49%, but once freed, FIF will match its actual float, boosting its MSCI weighting and drawing an estimated $5.6-$6 billion in foreign inflows to the stock and the banking sector overall.

Saudi National Bank (SNB) is set to follow suit, with a 92.8% free float and foreign ownership of 17.5%, expected to attract $800 million-$1 billion, further cementing Saudi banks as prime magnets for foreign liquidity.

In the telecommunications sector, Etihad Etisalat Co. (Mobily) offers a prime example: free float of 90.3% versus 23% foreign ownership. Despite high availability, its weight remains capped, leaving room to double its global index presence and broaden foreign fund participation.

In retail, both United Electronics Co. (eXtra) and Jarir Marketing Co. have free floats above 92%, albeit their holdings remained limited by the previous cap. Recalculation will unlock their true weights, positioning retail alongside banks and telecoms as key sectors for foreign inflows and broader diversification in the Saudi market.

**Based on Q3 2025 data.

***Foreign ownership cap raised to 60% following CMA approval in August 2018 after completion of Bupa Investments Overseas Ltd. deal.

MSCI data showed that banks dominate the Saudi index with a 44.7% weighting, underscoring their role as the market’s key performance driver.

Basic materials follow at 15.7%, with energy at 13.4% and telecoms at 10.3%. The heavy concentration means shifts in banks, materials, or energy have an outsized impact on overall market moves.

Other sectors carry far smaller weights: healthcare, consumer staples and technology each hover near 3%, while real estate and industrials fall below 2%.

This imbalance highlights the Saudi market’s reliance on banks and capital-heavy industries, making the foreign ownership cap lift in blue-chip stocks a crucial catalyst for foreign inflows and a reshaping of global index weights.

The top 10 Saudi stocks in the MSCI index include five banks, two basic materials firms, and one each from energy, telecoms, and utilities.

Al Rajhi Bank leads with a 16.67% weighting, followed by Aramco at 12.95% and SNB at 9.24%. Further, stc, Saudi Arabian Mining Co. (Maaden) and Saudi Basic Industries Corp. (SABIC) rank among the top contributors.