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Saudi Arabia Capital Markets Go Global

BY | ETF Database
9:18 am ET 01/15/26 | 4 VIEWS
Saudi Arabia is officially opening its capital markets more broadly to foreign investors. Effective February 1, 2026, foreign individuals and institutions will be able to participate directly in the Main Market (Tadawul) without needing to qualify under a special investor regime.The End of the QFI EraThis reform effectively eliminates the Qualified Foreign Investor (QFI) regime. Previously, foreign participation was restricted to large institutions that met strict eligibility criteria. The criteria included a minimum of $500 million in assets under management (AUM).Saudi Arabia's Growing Role in Global Market Landscape Saudi Arabia has become an increasingly important market for global investors. It is underpinned by its position as the largest equity market in the Middle East, a top-20 economy by GDP, and a key player in global energy, finance, and regional trade. Saudi equities are attracting growing attention for their potential diversification benefits and targeted sector exposure. This remains true even as investors continue to assess the market’s concentration and structural characteristics when determining appropriate allocations. Following a series of market access and infrastructure reforms, MSCI upgraded Saudi Arabia to Emerging Market status in 2018, with full inclusion in the MSCI Emerging Markets Index by 2019. As of October 2025, FTSE Russell similarly classifies Saudi Arabia as a Secondary Emerging market, a category that sits between Advanced Emerging and Frontier marketsHistorical Access: ETFs as a Primary Entry PointUntil recently, investors viewed direct access to Saudi equities as limited, costly, and operationally complex. As a result, many had only indirect exposure to the market.  Some examples of vehicles offering access to the country’s markets include the iShares MSCI Saudi Arabia ETF (KSA A), which provides broad and relatively liquid exposure to large- and mid-cap Saudi companies. Another fund is the Franklin FTSE Saudi Arabia ETF (FLSA ), which tracks a Saudi-focused index with an emphasis on cost efficiency and diversified market coverage. According to Ycharts, KSA manages approximately $642.61 million in assets with an expense ratio of 0.75%. FLSA manages roughly $21.35 million in assets and features a significantly lower expense ratio of 0.39%.Risk To ConsiderInvesting in Saudi Arabia’s markets can come with a number of risks related to its developing market status and regional geopolitical dynamics Concentration Risk: The market is heavily weighted toward energy, finance, and materials, compared with broader emerging market indexes. Evolving Governance: Corporate governance and disclosure standards are still developing relative to more mature markets. Currency and Geopolitical Factors: Foreign exchange fluctuations and regional geopolitical dynamics may influence returns. For more news, information, and analysis, visit VettaFi | ETFDB.

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