Saudi Arabia is adopting a tried-and-tested approach in opening its markets for foreign ownership, economists and analysts said on Friday.

“I believe the foreign ownership rules were announced in a timely and steadfast manner, offering transparency and commitment to opening the market,” said John Sfakianakis, a Riyadh-based investment strategist.

He was commenting on draft rules unveiled by the Capital Market Authority on Thursday for opening the $580 billion market to direct investment by foreign institutions, including a 10 percent cap on foreign ownership of the market's value.

Sfakianakis added: “I don't believe these measures will be well-received by local and foreigners alike given that the Saudi market offers fantastic opportunities for upward growth.”

He said: “The economy is growing at more than 4 percent, earnings over the next few years could reach 15 percent-20 percent, and dividends could surpass 3.5 percent over the next year.”

Sfakianakis says he expects more than $45 billion to enter the market from foreign investors which is well within the $58 billion mark provided by the 10 percent cap.

“A lot of foreign smart money will want to enter the Saudi market given that other markets might be reaching their upper limits going forward,” said Sfakianakis. “There are a plenty of local growth stories that is reminiscent of some EM markets of the 1990s,” he pointed out.

Commenting on the proposals, Basil Al-Ghalayini, CEO of BMG Financial Group, said: “These rules will definitely filter through the serious financial players who are long term investors, as well as, allowing only credible names from major financial markets.” He added: “These rules will help preventing short term speculators causing the market unwanted volatility.”

Al-Ghalayini said: “Furthermore, considering the size of the Saudi market, being the biggest in the region, the trading limits listed in these rules are still realistic and within the investment allocation strategies of global emerging funds managers.” The capital market reforms are attracting massive foreign interest.

The Tadawul All-Share Index continued its surge on Thursday and closed at 10,734.76 points.

The index has surged 25.76 percent so far this year after closing at 8,535.60 points on Dec. 31, 2013.

Reacting to the draft rules, a regional analyst said: “This is a tried-and-tested approach applied by other countries in connection with opening their markets for foreign ownership. The preference given to sizable, experienced institutional investors makes sense from the overall market development perspective but is particularly important in terms of boosting the presence of institutions in a hitherto retail-investor-dominated market.”

He added: “In general, the experience of markets embracing a gradual approach to opening up has been positive and had a significant positive impact on market development.”