THE SAUDI EXCHANGE

The Saudi Exchange (Tadawul) had some strong months in 2024, ending with a solid performance of 3.4% in December to end the year in positive territory. The market followed it up with a 3.1% gain in January.

Over the past decade, the market has had eight positive year-end results as investors are attracted to its strong valuation, robust diversification story, and sweeping reforms that have contributed to new company listings. 

Throughout 2024, the index experienced sharp fluctuations, hitting a low of 11,498.9 points in mid-June before gradually recovering. Market movements were largely influenced by regional geopolitical tensions, which impacted crude oil prices and global financial markets.

Sector performance was mixed, with 13 out of 21 indices recording gains. The capital goods sector led with a 52.8% surge, , driven primarily by a 154.9% jump in Electrical Industries Co. shares. The utilities sector followed with a 38.6% gain, supported by Miahona (+141.3%), ACWA Power (+56.5%), and National Gas and Industrialization Co. (+50.9%). The media sector also performed well, up 30.1%, led by MBC Group (+109.2%), and Saudi Research and Marketing Group (+60.4%).

On the other side, the energy index suered the biggest drop of 14.8%, with only one gainer (Bahri) unable to offset declines in the rest of the sector. Consumer staples and retail fell 13.5%, while the REITs and materials indices declined 13.5% and 12.3%, respectively.

Trading activity was strong, reaching a three-year high. The total value of shares traded hit SAR 1.85 trillion (USD 494.2 billion), up 42.1% from 2023, making it the second highest in the GCC after Kuwait. Trading volume saw the biggest growth in the region, jumping 69.3% to 167.8 billion shares, compared to 99.1 billion in 2023.

A strong IPO market in Saudi Arabia helped support the exchange, with 14 flotations on the Tadawul Main Market and 28 on the Nomu-Parallel Market. Tadawul was the Gulf region’s busiest in terms of new listings.

DEBT FINANCING

The market also benefitted from efforts by the Saudi Capital Market Authority (CMA) to bring new reforms to boost the market’s attractiveness.  

In February, the CMA sought feedback on a proposed project to develop the regulatory environment for investment funds in the kingdom by strengthening the asset management industry and boosting its competitiveness. This can be done by identifying areas for development and adopting global best practices.  

Additionally, the proposed project seeks to increase transparency and disclosure levels for fund unit holders, ensure governance standards that protect investor rights, and align with the CMA's strategic objectives to enhance the appeal of asset management in the kingdom.

The launch of that project coincides with a significant milestone achieved by the entities supervised by the CMA, as the total managed assets surpassed the one trillion mark by the end of 2024.

In February, CMA also said foreign investors can now invest in Saudi-listed companies owning real estate in Makkah and Madinah.

The initiative aims to attract foreign capital, enhance market effciency, and increase global competitiveness while supporting the local economy. By facilitating foreign investment, the CMA seeks to provide liquidity for ongoing and future projects in Makkah and Madinah, reinforcing the Saudi market as a major funding source for developmental initiatives in these cities. 

Foreign investment will be limited to shares of Saudi-listed companies that own real estate in Makkah and Madinah, as well as convertible debt instruments. The total ownership of non-Saudi individuals and entities is capped at 49% of a company’s shares. However, strategic foreign investors are not permitted to own shares or convertible debt instruments in these companies.

Additionally, the CMA has granted Saudi-listed companies the right to acquire ownership, easement, or usufruct rights over properties in Makkah and Madinah for use as headquarters or branch offces. These properties must be fully utilised for these specified purposes, as per the exemption regulations outlined in the Law of Real Estate Ownership and Investment by Non-Saudis. 

To enhance market appeal and promote foreign investment, the CMA has introduced several measures, including direct market participation for resident foreign investors, access through swap agreements, investment by qualified foreign financial institutions, strategic foreign stakes in listed companies, and direct investment in debt instruments. These initiatives provide diverse financing options for projects in Makkah and Madinah, aligning with the broader financial market framework.