SAUDI EXCHANGE

SAUDI EXCHANGE'S REGULATORY SYSTEM GETS NOD FROM INVESTORS

With a total market cap of USD 2.6 trillion, the Saudi financial market is now among the largest in the world. It is also growing in strength, depth, and regulatory excellence. 

The Capital Market Authority’s (CMA) latest annual report also highlights key developments in the market that have boosted investor sentiment and strengthened the Tadawul’s regulatory framework.

“According to the Annual Report, the Rules for Foreign Investment in Securities was approved. Additionally, amendments were made to regulations, rules, and instructions, including the Implementing Regulations of the Companies Law for Listed Joint Stock Companies, the Capital Market Institutions Regulations, the Instructions for Company Announcements, and the Investment Accounts Instructions,” the CMA report stated.

Additionally, the Real Estate Contributions Law, implemented in collaboration with the Real Estate General Authority (REGA), received approval from the Council of Ministers.

BREAKING NEW GROUND FOR SMES

A key market development has been that more than 50% of the approximately 70 companies recently listed on the Saudi financial market are small and medium-sized enterprises (SMEs), said CMA chairman Mohammed bin Abdullah Elkuwaiz, at a forum organised in September by the General Authority for Small and Medium Enterprise (Monsha’at).

Elkuwaiz stressed that one of the key CMA strategy's pillars is to boost liquidity and create new opportunities for smaller companies. Monsha'at is also focused on developing a dynamic debt market and advancing the asset management industry, which enables it to compete globally and attract more investments in the national economy.

"The stock market and financial technology sectors are critical to Saudi Arabia's ambitions of becoming a leading financial hub in the region," Elkuwaiz stated.

Meanwhile, the Saudi debt market has doubled in value to SAR 800 billion since 2019. Despite this expansion, the debt market remains under 20% of the saudi economy, offering sigificant room for further development.

Al-Quwaiz said that while banks have typically dominated the debt market, a broader range of investors, including funds, insurance companies, and other specialised entities, have entered the market in recent years.  

“The next phase in the debt market's development would focus on encouraging greater foreign investment by joining more global indices and expanding the market's scope beyond regulatory changes. The current favourable conditions in Saudi Arabia’s debt market make it an attractive option for foreign investors, particularly compared to the stock market,” according to the Saudi Press Agency.

AN EXPANDING MARKET

CMA reported that the size of the sukuk and debt instruments market reached 18.3% of the GDP by the end of 2023. The number of sukuk and debt instruments listed on the capital market reached 70, with the funds raised from sukuk and debt instrument offerings amounting to SAR 29.95 billion, including SAR 29.85 billion from private placements and SAR 100 million from public offerings.

“Regarding foreign investment in the Saudi capital market, 2023 witnessed unprecedented record levels, with net foreign investments reaching SAR 198 billion, an increase of 7.7% compared to 2022,” CMA noted. “The ownership of foreign investors continued to rise, reaching SAR 401 billion by the end of 2023.”

in addition, the number of offerings and listings in the saudi capital market reached 43 in 2023, representing a 79% increase over the target set for the year. This inc;uded the public share offerings of seven compe- nies in the main market, the listing of 29 companies in the parallel market, the direct listing of six companies' shares in the parallel market, and the listing of a traded real estate fund.

The momentum has continued in 2024. Saudi Arabia dominated the GCC's initial public offering {IPO{ market, with 19 IPOs in the first half of 2024, compared to 17 in the first half of 2023, according to PwC. The management consultancy also noted that 10 IPOs took place on the Saudi Exchange Main Market and Nomu Parallel market in the second quarter alone – five on each exchange.

Meanwhile, Saudi IPOs accounted for over 61%, or USD 1.6 billion, of total GCC IPO proceeds in the second quarter of 2024.

In terms of market performance, the Saudi Exchange market is up 2.2% in the first nine months of the year, building on the 14.2% jump in 2023.

While energy stocks, down 17.3% as a group, have weighed down the market, investors have found plenty of opportunities in the wider market.The utilities index is up 65.1%, media has expanded 38.9%, and capital goods index is 33.5% higher, while real estate management and development (up 26.8%), software and services (up 25.8%) and insurance (up 24.3%) suggest a broad market expansion.