Daily Insider: Saudi’s 300% foreign investment surge success

Saudi Arabia has been the biggest economy in the GCC region for some time, but the liberalisation of the economy in that country is bringing in more investment than ever before.

One perfect example is the booming level of foreign investments in the kingdom’s capital markets. A note published by Saudi Arabia’s Capital Market Authority (CMA) this week says the value of foreign investments in the Saudi capital market has increased by 300% from 2018 to the end of 2022, topping SAR 347bn. 

This means that foreign investments in the market rose from 3.77% (SAR 86.86bn) of the total value of free float shares in that market in 2018, to 14.2% in 2022.

Reading between the lines, it is interesting to note that this uptick in foreign interest definitely didn’t happen overnight. 

The CMA says foreign investors were only allowed to start directly investing in the Saudi capital market in 2015. 

“Since allowing foreign investors to directly invest in the capital market in 2015, the Saudi Capital Market has evolved from a local market to one where the foreign investor participates in daily trading at rates exceeding 17%, compared to less than 4% before,” said the CMA.

Effectively then, this success story has been at least 8 years in the making. The CMA goes on to note that appetite for its debt instruments has also been on the rise. Foreign investor ownership in Saudi debt instruments has increased more than tenfold ever since that market was opened to all foreign investors, without restrictions, in 2020.

But in a world where capital and debt markets are increasingly diverging from the real economy, Saudi Arabia is also bucking the trend.

As reported by Gulf Business last week, KSA is expected to experience one of the world’s fastest GDP growth rates next year, with Moody’s forecasting that its economy will expand by 4.6% next year, only slower than India (6.2%) and Indonesia (5%).

This is in a world where the West is set to experience sub-1% growth as the globe still untangles itself from high inflation and high interest rates.

The Saudi success story is a good news story for the entire GCC region. As they say, a rising tide lifts all boats.