Foreign Investors Are Making A Bigger Bet On Saudi Stocks

(MENAFN- Gulf Times) Saudi Arabia's battered stock market is looking increasingly attractive to foreign investors because of rock-bottom valuations and bets that the oil price won't drop much further.
Investors from beyond the Arabian Gulf accounted for 41% of total Saudi equities buying in the week ended August 28, one of the highest ratios on record, according to Saudi stock exchange data compiled by Bloomberg Intelligence.
The flows signal that a rush of reforms making it easier for foreigners to buy Saudi stocks is working. For the time being, however, risks still have the upper hand with the Tadawul All Share Index down 11% year to date and domestic investors on the retreat, along with crude prices.
Nishit Lakhotia, head of research at SICO Bank, said stock investors are currently pricing in a“worse-case scenario” for the Saudi market, which he expects to bottom out shortly, unless oil drops below $60 a barrel - which would amount to a roughly 10% drop from current levels.
“We believe the momentum is still there in the economy, which does not warrant such depressed valuations,” he said.“While it's hard to predict when exactly the market can turn, there will likely be a point - sooner than later - when smart investors will start buying.”
The slump has made Saudi stocks look relatively attractive, with the benchmark index near the lowest price-to-earnings multiple in more than five years. Junaid Ansari, director of investment strategy and research at Kamco Investment Co, expects a sharp turnaround in sentiment from the fourth quarter, when investors start making allocations for 2026.
“The Saudi market is an oversold market,” said Ansari. While foreigners have largely been net buyers,“the sellers are mainly institutions in Saudi Arabia which we believe are selling to focus on other investment opportunities in the Kingdom,” he said.
Nevertheless, the weak oil market is weighing down Saudi assets. Brent crude is trading around $66 per barrel, well below the nation's fiscal breakeven price of $94, according to Bloomberg Economics. If domestic investments by the kingdom's sovereign wealth fund are included, the figure rises to $111.
While foreigners accounted for about 35% of all Saudi stock purchases in August, continuing a strong trend, daily turnover on the market has dropped to the lowest level since 2023. This means that international investors are grabbing a bigger slice of a smaller pie.
Still, the gloom over the kingdom's stocks may be over-hyped, especially as a negative perception of earnings is in large part based on giants, such as Saudi Arabian Oil Company and Saudi Basic Industries Corp.
Excluding Aramco and Sabic, Saudi stocks are showing roughly 7% profit growth, Kamco's Ansari said. Even as the Tadawul index has declined, owners of Saudi National Bank and Saudi Telecom Co shares have seen 11% and 13% returns, respectively, so far this year.
“Although earnings growth for 2025 and 2026 is among the lowest across emerging markets, valuations have become more attractive,” said Nenad Dinic, an emerging-markets equity strategist at Bank Julius Baer & Co Ltd market foreign investors Arabian Gulf Saudi stock exchange data

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