Saudi Financial Market: Comprehensive Overview and Key Indicators

The stock market is an organized marketplace where securities such as stocks, bonds, investment funds, and sukuk are traded. The stock market acts as a central intermediary between sellers and buyers, ensuring transparency and enforcing regulatory frameworks to protect the rights of all parties involved. In the Kingdom of Saudi Arabia, the term 'stock market' refers to the Saudi financial market (Tadawul), which was established under licenses from the Capital Market Authority (CMA) with the aim of developing and regulating the securities market and enhancing the investment environment in line with global developments. Tadawul was established in its modern institutional form in 2003, and since then, it has experienced continuous growth in the number of listed companies and trading values, making it the largest in the Arab world in terms of market capitalization and the number of represented sectors. The stock market plays a pivotal role in providing financing to companies through public offerings and capital increases, while also allowing investors to diversify their investments and achieve financial returns based on market and company performance.

The idea of trading securities in Saudi Arabia began in the 1970s, but the formal organization of the financial market did not start until the dawn of the new millennium, with the establishment of the Saudi Capital Market Authority in 2003 and the creation of the Saudi Stock Exchange (Tadawul) as an official institution managing the market's infrastructure. The Saudi stock market has undergone rapid developments; it transitioned from an emerging market with a limited number of companies to an advanced stock exchange comprising over 225 companies by the end of 2024, covering sectors such as banking, industry, retail, telecommunications, energy, and more. Tadawul has invested heavily in modernizing its technical systems and enhancing transparency and disclosure levels, which has contributed to boosting the confidence of local and international investors. The Saudi market has also joined global emerging market indices such as MSCI and FTSE, leading to new foreign investment inflows and increased trading liquidity.

The Saudi stock market is divided into several main sections to ensure it meets the needs of different companies and investors:

1. Main Market: Includes large companies with high capitalization and strict regulatory requirements, encompassing most banks, energy companies, telecommunications, basic industries, and others.
2. Parallel Market (Nomu): Represents a platform for small and medium-sized enterprises and startups that do not meet the listing criteria in the main market. It features simplified listing requirements and lower liquidity but offers higher growth opportunities.
3. Sukuk and Bonds Market: Dedicated to trading government and quasi-government bonds and Islamic sukuk, subject to specific rules that ensure transparency and protect investor rights.
4. Investment Funds and Exchange-Traded Funds (ETFs): Provide diverse investment tools for individual and institutional investors through the purchase of units in funds that invest in stocks, bonds, or sector indices.

This diverse structure enhances market flexibility and allows for attracting various types of investors, from large portfolios to new individual investors.

The Saudi stock market relies on a set of financial indicators to measure and evaluate the performance of the market and listed companies, the most notable of which are:

- Tadawul Index (TASI): The general index for the main market, reflecting the price movements of stocks for all listed companies and considered the primary indicator for market monitoring.
- Sector Indices: Include 21 sector-specific indices (such as the banking index, telecommunications index, energy index) to measure the performance of each sector individually.
- Parallel Market Indices (Nomu): Monitor the performance of small and medium-sized companies listed in the Nomu market.

Tadawul updates these indicators daily and announces them through its official platforms, serving as a reference for investors to analyze market trends, track sector performance, and compare company results over time.

The Saudi stock market has witnessed significant growth in size and the number of listed companies in recent years. By the end of 2024, the number of companies listed in the main and parallel markets reached approximately 225, representing diverse sectors such as banking (Al Rajhi Bank, National Bank), energy (Aramco), basic materials, telecommunications, retail, financial services, and more. The total market capitalization exceeded several trillion Saudi Riyals, with the market value of the largest company (Aramco) reaching about 9 trillion Riyals in 2024. This diversity contributes to attracting different types of investors and enhances market stability in the long term.

The average daily trading value in the Saudi stock market rose to 6-7 billion Riyals in the second half of 2024, with a notable recovery in trading volume coinciding with the listing of new companies and initial public offerings. High liquidity and the influx of local and foreign capital have enhanced market activity, especially in the financial and basic materials sectors. The stock market also witnessed the entry of individual investors, investment portfolios, and exchange-traded funds, leading to an increase in the volume of traded shares and the number of daily transactions. Tadawul and the Capital Market Authority are keen to enhance transparency and disclosure to reassure investors and ensure market fairness.

The financial sector (banks and financial services) topped the list of influential sectors in the Saudi stock market during 2024, with major banks accounting for a significant portion of the market index. Basic materials sectors (especially petrochemicals) achieved notable gains due to rising domestic demand and declining production costs. The telecommunications sector experienced growth due to increased profits from listed companies, while the retail sector emerged with the recovery of the national economy and rising consumer spending. Conversely, the transportation and logistics sector faced pressures that led to relatively lower performance. The sectoral diversity in the stock market enhances its ability to withstand economic fluctuations and provides multiple investment opportunities.

The Saudi stock market is overseen and monitored by the Capital Market Authority (CMA), which establishes regulations and procedures governing trading, listing, disclosure, and investor protection. The Authority's tasks include:
- Reviewing and approving prospectuses and listings.
- Monitoring financial disclosures of listed companies.
- Developing governance and transparency rules.
- Combating manipulation and insider trading.
- Launching educational and awareness initiatives for investors.

The Authority aims to achieve a fair and transparent investment environment, positively reflecting on the confidence of local and international investors and enhancing the attractiveness of the Saudi market as a regional and global investment destination.

The infrastructure of the Saudi financial market is managed by the Saudi Stock Exchange Holding Company (Tadawul), listed under symbol 1111. Tadawul operates trading platforms, develops technical systems, manages listing and disclosure processes, and provides financial and analytical data to investors. In 2024, the market capitalization of Tadawul Holding reached approximately 20 billion Saudi Riyals, with an average share price of 170 Riyals and a price-to-earnings ratio between 15-16. The company has witnessed significant growth in revenues and net profits due to the increase in trading volumes and the development of digital services. Tadawul focuses on technological innovation and providing advanced solutions to enhance market efficiency and attract local and global investors.

The Saudi stock market offers a wide range of financial products that meet various investment strategies and goals, including:
- Stocks: Representing ownership in listed companies.
- Bonds and Sukuk: Debt instruments issued by companies or the government that provide fixed income.
- Exchange-Traded Funds (ETFs): Units that invest in stocks, bonds, or sector indices.
- Rights Issues: Granting shareholders the right to purchase new shares when capital is increased.

This diversity allows investors to build balanced investment portfolios that align with their risk tolerance and expected returns, contributing to increased market depth and enhancing its liquidity.

The Saudi financial market (Tadawul) is the only licensed stock exchange for trading securities in the Kingdom, thus facing no direct local competition in market management. However, competition to attract investments is prominent at the level of the financial services sector, with major banks (Al Rajhi, National, Alinma) and brokerage firms offering diverse products to investors. Regionally, Tadawul competes with exchanges such as Dubai Financial Market, Abu Dhabi, Kuwait, and Qatar to attract companies for listing and liquidity from Gulf and global funds. The Saudi market is distinguished by its large size, strong economy, and diverse sectors, giving it a competitive edge at the regional and global levels.

The Saudi stock market witnessed new company listings in strategic sectors during 2024-2025, the most notable being the announcement of NAS Air's initial public offering valued at 4.1 billion Riyals, which enhanced market size and attracted additional liquidity. New financial products such as exchange-traded index funds and issuances of sukuk and government bonds were also launched. On the regulatory front, the Capital Market Authority launched the 'Qualified Investor' portal and allowed margin trading under specific controls. Efforts to develop digital services continued, with updates to trading applications and facilitating immediate access to financial information. These developments affirm the Saudi stock market's commitment to keeping pace with global markets and meeting investor expectations.

The Capital Market Authority and Tadawul place great importance on enhancing levels of transparency and governance in the Saudi financial market. All listed companies are required to regularly disclose their financial results and significant changes in their conditions, and precise governance rules are applied to protect shareholder interests and safeguard investors. The Authority has launched awareness programs and campaigns to combat manipulation and disseminate rumors, and developed electronic platforms for immediate disclosure in both Arabic and English. These efforts have led to an increase in market transparency and attracted institutional investors who require high governance standards before committing their investments.

The Saudi stock market plays a pivotal role in supporting the Kingdom's economic development plans under Vision 2030 by:
- Financing major projects through public offerings.
- Attracting foreign investments by joining emerging market indices.
- Encouraging small and medium-sized enterprises to list through the Nomu market.
- Diversifying the investment tools available to citizens.

The growth of the stock market contributes to increasing the depth of the Saudi economy, stimulating employment, and supporting innovation in various sectors. The stock market also enhances the Kingdom's position as a regional financial hub and contributes to achieving economic diversification and developing the financial sector.