Financial event of the year: Saudis open their stock market to foreigners. But restrictions could dampen enthusiasm

"Qualified foreign investors (QFIs) could commence dealing in listed shares," Saudi Arabia's stock exchange said in a statement. However, in analysts' view, tough regulations may decrease investors' enthusiasm. 

The note was addressed to foreign banks, brokerage houses, fund managers and insurance companies based outside the Gulf.

The move is largely seen as a desire of the conservative Islamic kingdom to further open up to the global economy.

But analysts said they did not expect a sudden avalanche of funds after the opening of the Arab world's largest exchange, the Tadawul All-Shares Index, in Riyadh.

According to Capital Economics, there would be heavy restrictions in place regarding foreign equity ownership.

Qualified investors must have a five-year track record and manage at least 18.75 billion riyals ($5 billion, 4.5 billion euros). Moreover, each investor can hold no more than 5 percent of a given stock.

Market analysts estimated that Saudi Arabia's move was not about spurring investment, as its market capitalization exceeds $500 billion.

Rather, the main payoff from attracting foreign investors would be improved transparency, accountability and availability of macroeconomic data.

Capital Economics also calls to note that a fifth of stocks consists of petrochemical companies whose earnings are tied to oil prices, which have plunged by 40 percent from a year ago, thus investing here would bear risks.

Looking ahead, interest may shoot up in a few years if Saudi moves on from its frontier market status to join the most widely followed emerging markets index, the MSCI, BBC News says.

Mohieddine Kronfol, a founding partner of Franklin Templeton Investments ME, believes a great journey has begun,  saying that it could finally lead to an energised debt market and also predicts that pressure will increase for domestic political and social reforms from ethical investors of the future.

Saudi stock exchange

• Called the Tadawul
• Trading hours are 11:00 to 15:30, Sunday to Thursday
• Lists 165 publicly traded companies
• Real estate is the biggest sector on the index, making up 16%, followed by petrochemicals (15.4%) and banks and financial services (14%)