Foreign Access Channels and Investor Flows: Evidence from Saudi Arabia

This study investigates whether two amendments to Saudi Arabia’s Qualified Foreign Investor (QFI) framework increased QFI net flows relative to swap-holder flows. Drawing on 140 weekly observations from December 2015 to August 2018, the analysis estimates controlled QFI-minus-swap flow differentials in event windows surrounding the 2016 and 2018 regulatory amendments. The estimated differentials are negative and statistically significant, at approximately −0.063 and −0.032 percentage points of free-float market capitalization per week, respectively. These results are robust across the main short-run empirical specifications and a range of robustness checks. The evidence indicates that easing the direct-access framework did not produce an immediate strengthening of QFI flows relative to swap-holder flows. More broadly, the findings underscore the importance of assessing capital-market liberalization not only through changes in aggregate foreign participation but also through the relative flow performance of the access channel targeted by reform. This perspective provides a more nuanced basis for assessing the effectiveness of financial-market reforms in supporting market development.