The Saudi Exchange: Building the Future of Capital Markets Today
What is drawing foreign investors to the Saudi Exchange? At Saudi Capital Market Forum 2023, in Riyadh on February 12-13, international financial leaders will discuss the forces behind this trend – and more.
Moving into 2023, Saudi Arabia has maintained its strong positioning in the global financial market and it continues to evolve and grow – on track to overtake India in Q1 2023 as the world’s fastest-growing major economy with expected GDP growth of 7.6% by the end of the fiscal year in March.1 And it’s also been widely reported that the country enjoyed an employment surge in 2022 that saw its greatest job growth in five years.2
The Saudi Exchange’s growth is a key economic driver for Saudi Arabia
The Saudi Exchange’s growth and development in recent years is one of the clearest barometers of the Kingdom’s economic strength. The largest exchange in the Middle East – and the ninth largest in the world – the Saudi Exchange had a Main Market capitalization of SAR 9.87 trillion (USD 2.62 trillion) at the end of 2022, while its Nomu - Parallel Market closed the year with a market capitalization of SAR 35.09 billion (USD 9.34 billion).3 These two markets within Saudi Exchange continue to receive a strong inflow of new listings – adding seven and eight companies, respectively, in Q4 2022 – for a total 269 listed issuers across both markets.4
Such dynamic growth helps to lift the surrounding economies, as evidenced by the Middle East and North Africa (MENA) region’s 288% year-over-year increase in newly listed issuers in the first three quarters of 2022 – providing a notable contrast to global IPO trends.5
The Saudi Exchange’s strong liquidity, sophisticated infrastructure and technology, transparent systems, and diverse investment offerings are making the market increasingly attractive to both regional and international investors. In turn, the Exchange is enhancing Saudi Arabia’s position as a key global financial hub that links the East and West.
Supporting Vision 2030
The Saudi Exchange and Saudi Tadawul Group (the Group), the Exchange’s parent company, are enabling the growth of the Saudi economy in line with Saudi Arabia’s Vision 2030 – a blueprint to transform Saudi Arabia into a global nation with a diverse financial ecosystem that connects economic opportunities in the Middle East to businesses and investors worldwide.
Notably, the Saudi stock exchange’s transformation into the Saudi Tadawul Group in April 2021 was itself a milestone in realizing Vision 2030. Following the transformation, the Group is better positioned to drive and maintain the Saudi capital market’s growth through its more sustainable, scalable structure and business model.
The Group and the Saudi Exchange continue to enhance their infrastructure and build their offerings beyond the initial transformation. They made significant strides on this front in 2022 by implementing the most extensive bundle of post-trade enhancements in the Exchange’s history and a new single stock futures (SSFs) product offering on the derivatives market.6 Such achievements, along with a range of additional enhancements introduced last year, not only support the Saudi Exchange’s mission to offer best-in-class services to all market participants but also help drive the economy toward the realization of Vision 2030.
Serving as a bridge to global markets
The Saudi Tadawul Group and the Saudi Exchange are also simultaneously forging strong relationships with other markets in the MENA region and beyond – and drawing in new investors from around the world.
Most recently, in December 2022, the Saudi Exchange hosted its first dual listing, Americana Restaurants (AMR), with the Abu Dhabi Securities Exchange (ADX). This followed a 2019 agreement with ADX to encourage cross listings. Posting a net profit of $204 million in 2021, Americana Restaurants has over 2,000 franchised restaurants across the MENA region and Kazakhstan, including iconic brands such as Baskin Robbins, Krispy Creme, Peet’s Coffee, and TGI Fridays.7
During the same month that the Saudi Exchange debuted its first dual listing, it also signed new agreements with the Muscat Stock Exchange (MSX) to allow companies to list on both markets, providing investors with new access to MENA markets.8 And since July 2021, the Saudi Exchange has had a standing agreement with the Swiss Stock Exchange (SIX) to collaborate on cross-listings, ESG standards, and other areas of innovation.9
Beyond creating synergies with other major exchanges, the Saudi Exchange is also building bridges to large banking entities to enable a greater flow of global investors into the Saudi fixed-income market. Recent examples include establishing formal links with Euroclear Bank (a Brussels-based international central securities depository, or ICSD) in May 202210 and Clearstream (the post-trading service provider of Deutsche Börse Group) in June 2021, giving investors greater access to trade sukuk (Shariah-compliant bonds) and conventional bonds.11 In fact, in April 2022, sukuk bonds saw their first inclusion in a global index, when the Saudi sukuk market joined the FTSE Russell Emerging Market Government Bond Index (EMGBI).12
The Saudi Exchange’s increased engagement with foreign markets suggests that its ambitions extend far beyond the Kingdom’s borders – and that there is a growing international appetite for access to the Saudi market.
Attracting foreign investors
Qualified foreign investors (QFIs) have shown increasing interest in the Saudi capital market for several years, and the Kingdom’s financial leaders are committed to making their entry quicker and easier. In September 2021, for example, the Saudi Capital Market Authority revised regulations that relaxed the registration criteria and restrictions for QFIs, allowing them to invest in securities and face fewer investment limits.13
With these improvements, the number of registered QFIs on the Saudi Exchange surged from 118 at the end of 2017 to 3,151 by the end of 2022.14 As a percentage of trading, QFIs accounted for 19.6% of the trading value on the Saudi Exchange’s Main Market at the end of 2022, up from 10.5% only a year before.15 Such rapid growth illustrates the increasingly important role that foreign investors play in the Saudi capital market.
The 2nd Annual Saudi Capital Market Forum
On February 12 and 13, 2023, the Group will host the second annual Saudi Capital Market Forum in Riyadh. This year’s event, SCMF 2023, will bring together issuers, investors, and other market participants from MENA countries and around the world to discuss issues that are vital to advancing the Saudi and regional capital markets.
SCMF 2023 will focus on four topic tracks: The evolution of global capital markets, ESG, equity capital markets vs. debt capital markets, and the impact of innovation and digitalization on the MENA economies. More than 45 thought leaders from the financial industry will gather onsite to explore these themes, with speakers including:
- H.E. Mohammed El Kuwaiz, Chairman of Saudi Capital Market Authority
- Sarah Al-Suhaimi, Chairperson of Saudi Tadawul Group’s Board of Directors
- Amin E Nasser, President and CEO of Aramco
- Adena T. Friedman, Chair, President, and CEO of Nasdaq
- Khalid Abdullah Al-Hussan, CEO of Saudi Tadawul Group
- Mohammed Sulaiman Al-Rumaih, CEO of the Saudi Exchange
- Richard Cormack, Co-Head of ECM & Convertibles in EMEA and Co-Head of UK Investment Banking, Goldman Sachs
- Patrick George, Head of Markets & Securities Services in Europe and North America, HSBC
“With Saudi Arabia on the threshold of becoming the world’s fastest-growing economy, we see the harmony of regional and international capital markets as crucial to shaping the economic future of the MENA region and beyond,” says Khalid Abdullah Al-Hussan, CEO of the Group. “Our second annual Saudi Capital Market Forum will capitalize on the momentum we’ve built by bringing together business and capital markets leaders to continue dynamic discussions on the evolution of capital markets in the region and around the world amidst a challenging global economic landscape. SCMF 2023 is a clear illustration of the Group’s commitment to continue generating innovative investment opportunities for the global financial community and serving as a bridge connecting the MENA economies with sophisticated investors around the world.”
As the nation progresses on its Vision 2030 journey to transform Saudi Arabia’s economy, the Group and the Saudi Exchange are dedicated to bringing global investors into the growing Saudi capital market. Through ongoing innovation and collaboration efforts, such as SCMF 2023, the Group and the Saudi Exchange will continue to create new paths for issuers and investors, helping them to find attractive opportunities in the expanding Saudi capital market – and the stream of nascent, burgeoning, and advanced economic developments in the MENA region.
1 Roy, Anup and Bhatia, Ruchi. Jan 6 2023. India Set to Lose Fastest-Growing Major Economy Title. Bloomberg. https://www.bloomberg.com/news/articles/2023-01-06/india-set-to-lose-fastest-growing-major-economy-tag-in-fy23?leadSource=uverify%20wall
2 Abu Omar, Aber. Jan 3 2023. Saudi Jobs Growth Is Strongest in Half Decade Amid Business Boom. Bloomberg. https://www.bloomberg.com/news/articles/2023-01-03/saudi-jobs-growth-is-strongest-in-half-decade-amid-business-boom?leadSource=uverify%20wall
3 Saudi Tadawul Group.
5 EY. Oct 25 2022. Seven MENA IPOs raised US$1.5b in Q3 2022. https://www.ey.com/en_sa/news/2022/10/seven-mena-ipos-raised-us-1-5-billion-in-q3-2022
6 Saudi Tadawul Group.
7 Americana Restaurants. Nov 2 2022. Announcement of intention to float through a concurrent dual listing on the Abu Dhabi Securities Exchange and the Saudi Stock Exchange. https://www.americanarestaurants.com/wp-content/uploads/2022/11/Intention_to_Float_Announcement_.pdf
8 Sharma, Alkesh. Dec 22 2022. Saudi Tadawul teams up with Muscat bourse to enable dual listings. The National News. https://www.thenationalnews.com/business/markets/2022/12/22/saudi-tadawul-teams-up-with-muscat-bourse-to-enable-dual-listings/
9 SIX Signed an MoU With Saudi Stock Exchange Tadawul for Future Cooperation. July 14 2021.Fintechnews Switzerland.
10 Euroclear. Oct 27 2021. Euroclear and Edaa to launch new post trade link in Saudi Arabia. https://www.euroclear.com/newsandinsights/en/press/2021/2021-mr-26-euroclear-edaa-launch-link-in-saudi-arabia.html
11 Clearstream. July 6 2021. Clearstream and Edaa open connection to increase international investor access to the Saudi capital market. https://www.clearstream.com/clearstream-en/newsroom/210607-2672924
12 Nair, Deepthi. Oct 2 2021. Saudi Arabia sukuk market added to FTSE bond index. The National News. https://www.thenationalnews.com/business/markets/2021/10/02/saudi-arabia-sukuk-market-added-to-ftse-bond-index/
13 Saudi Tadawul Group.
14 CMA Further Expands Foreign Investors Access to Saudi Capital Market