Money is a central element in the economy and the Saudi financial market, representing the primary means for buying and selling stocks, bonds, funds, and other investment products. In the first 100 words of this article, we focus on money as the vital tool that allows investors to participate in the Saudi financial market (Tadawul), where money is the critical factor in determining liquidity and market values of companies. The importance of money extends beyond being a medium of exchange; it also serves as a store of value and a measure of overall economic activity, such as GDP and circulating liquidity. Money in the Saudi market takes on a special character due to the stability of the Saudi riyal and the policies of the Saudi Arabian Monetary Authority (SAMA), which bolster confidence in the national economy. The movement of money in the local market is influenced by factors such as global oil prices, monetary policies, and developments in financial and technological sectors. In this comprehensive article, we explore the concept of money and its forms, its relationship with liquidity, its role in the financial market, associated indicators, sector analysis, challenges and opportunities, and the latest developments, while clarifying the most common questions about money in the Saudi market.
The Concept of Money: Definition and Fundamental Role in the Economy
Money is one of the fundamental concepts in economics, defined as any asset used as a medium of exchange, unit of account, and store of value. In its simplest forms, money includes paper currency, coins, immediately withdrawable bank balances, as well as other forms such as checks, certificates of deposit, and short-term financial instruments. Money represents the tool through which individuals and companies can evaluate and exchange goods and services, providing a means to save wealth for future investment or consumption. In the Saudi financial market, money is the primary driver of trading operations, used to buy and sell securities, reflecting the volume of liquidity available in the market. Cash liquidity plays a pivotal role in determining financial asset prices and the value of listed companies. The stability of money, especially the Saudi riyal linked to the US dollar, enhances confidence among local and international investors and reduces risks associated with currency fluctuations. Overall, money is the foundation upon which all economic and financial operations in the Saudi market are based.
Forms of Money in the Saudi Financial Market
Money in the Saudi financial market takes several forms, the most important of which are paper currency (Saudi riyal), bank balances, and investment accounts. Additionally, forms of money include other liquid assets such as certificates of deposit, financial instruments, and short-term debt instruments. Within the financial market, money is considered anything that can be quickly converted into cash for use in executing purchases or investments. Bank and investment accounts play a central role in facilitating the trading of securities, allowing investors to transfer funds between different accounts quickly and efficiently. The proliferation of digital platforms and financial technologies (Fintech) has added new layers of digital liquidity, such as e-wallets and instant payment applications. These developments have contributed to increasing the ease of trading money, whether in traditional investments or innovative financial products. It is noted that liquidity in the Saudi market is closely linked to the level of overall economic activity, as higher liquidity leads to increased trading rates and higher market values of listed assets.
The Role of Money in Stock Trading and the Saudi Financial Market
Money is the central element in stock and securities trading in the Saudi financial market. It represents the capital used to purchase stocks, bonds, and investment funds, enabling investors to respond quickly to investment opportunities or manage risks. The movement of money between investors and listed companies reflects levels of confidence in the market and determines the amount of liquidity available. Through money, listed companies can raise new capital through initial public offerings or capital increases, while investors gain access to a variety of investment tools that yield future returns. Additionally, the abundance of money and its liquidity contribute to raising the market value of companies and support the sustainability of market growth. The financial liquidity flowing in the market is a key indicator of the health and stability of the investment environment. Furthermore, liquidity enables investors to diversify their investment portfolios and spread risks across multiple sectors and assets. In this context, monetary and regulatory policies play a role in directing the movement of money and ensuring the stability of the Saudi financial market.
The Relationship Between Money and Liquidity in the Financial Market
Liquidity is the ability of a financial asset to be quickly converted into cash without a significant loss in value. In the Saudi financial market, the term liquidity is often used to refer to the money available for investment and movement between different financial assets. As liquidity in the market increases, trading levels rise, and investors' ability to execute buy and sell orders quickly improves. Liquidity is considered a vital indicator of market efficiency, indicating the presence of a large number of buyers and sellers and their ability to enter and exit trades easily. The stability of liquidity is linked to several factors, including the monetary policies of the Saudi Arabian Monetary Authority, the volume of bank deposits, and the level of overall economic activity. In times of high liquidity, markets often become active, and asset prices rise, while a lack of liquidity may lead to slowed trading and declining stock prices. Effectively managing liquidity is a priority for both investors and companies, as it allows them to take advantage of investment opportunities or meet urgent financial obligations.
Key Money Indicators in the Saudi Market
Several financial indicators are used to measure the volume of money and liquidity in the Saudi financial market. Among the most prominent of these indicators are:
- Money Supply (M2): This is the total amount of cash circulating outside banks plus demand deposits and savings deposits. This indicator reflects the volume of liquidity available in the economy.
- Market Capitalization: The total market value of listed stocks in the financial market. This figure shows the extent and activity of the market.
- Daily Trading Volume: Refers to the total value of executed transactions daily, serving as an indicator of financial activity density.
- Price-to-Earnings Ratio (P/E): Measures the relationship between the stock price and the company's earnings, used to evaluate investment attractiveness compared to expected returns.
- Dividend Yield: The ratio of distributed profits to the stock price, considered an indicator of periodic returns for investors.
- Revenue and Profit Growth: Reflects companies' ability to generate sustainable returns, an important indicator of market attractiveness.
Recent data (2024-2025) indicates that the Saudi market has witnessed an increase in market capitalization, profit growth, and stability in liquidity indicators, demonstrating the strength of circulating money and market efficiency.
The Impact of Monetary Policies and Interest Rates on Money and Liquidity
The monetary policies set by the Saudi Arabian Monetary Authority (SAMA) play a pivotal role in managing the volume of money and liquidity in the financial market. By setting key interest rates, SAMA can direct the flow of liquidity between banks and the financial market. Raising interest rates encourages saving and reduces lending, which may lead to a contraction of liquidity available in the financial market. Conversely, lowering interest rates stimulates spending and investment, increasing the flow of money into the stock market and other financial assets. During the years 2024-2025, SAMA maintained relatively stable interest rates at around 3.75%, helping to maintain the attractiveness of bank deposits and support liquidity stability in the market. These policies aim to achieve a balance between supporting economic growth and controlling inflation while ensuring the stability of the Saudi riyal linked to the US dollar. The impact of these policies extends to all sectors of the economy and is clearly reflected in liquidity indicators and the movement of funds between investors and companies.
The Relationship Between Oil Prices and Financial Liquidity in Saudi Arabia
The Saudi economy heavily relies on oil revenues, making global oil prices a key factor in determining the volume of money and liquidity in the local market. When oil prices rise, state revenues increase, allowing the government to inject investments into new projects or increase public spending. This, in turn, leads to increased liquidity in the economy and banks, positively reflecting on trading volumes in the Saudi financial market. Conversely, a decline in oil prices may lead to reduced liquidity and pressures on the public budget, potentially limiting government investments and affecting the performance of listed companies. The stability of the Saudi riyal against the dollar provides relative protection from exchange rate fluctuations, but it does not completely insulate the market from the risks of oil price volatility. For this reason, investors and financial institutions continuously monitor developments in oil prices to assess their impact on liquidity and the movement of money in the Saudi market.
The Saudi Financial Sector and Its Role in Managing Money and Liquidity
The Saudi financial sector is one of the largest and most important sectors in the national economy, comprising commercial banks, investment companies, insurance firms, and financial technology (Fintech) companies. Banks are the primary channel for gathering and managing funds, receiving deposits from individuals and companies and providing the necessary financing for projects and investments. Investment companies manage assets and funds, directing liquidity towards diverse investment products. Insurance and leasing companies collect premiums and reinvest them in the financial market. In recent years, the financial sector has witnessed significant development with the proliferation of electronic payment platforms and modern financial technologies, increasing the efficiency of money transfer and investment. The Capital Market Authority (CMA) and the Saudi Arabian Monetary Authority regulate and supervise the sector to ensure its stability and transparency while encouraging innovation to attract more liquidity for investment in the Saudi financial market.
Competition Among Banks and Financial Institutions to Attract Money
The Saudi financial market is experiencing strong competition among commercial banks, brokerage firms, and asset management companies to attract investors' funds. Major banks such as the National Commercial Bank, Al Rajhi Bank, and the Saudi National Bank attract customer deposits by offering a variety of investment services and products with competitive returns. Brokerage and asset management firms provide mutual funds and hedge funds, offering multiple investment options for investors seeking returns or risk diversification. With the increasing openness of the Saudi market to foreign investments, international institutions are also competing to attract liquidity from abroad. This competition drives financial institutions to develop their services and offer innovative solutions, positively reflecting on market performance and contributing to increasing the volume of circulating money and sustaining liquidity.
The Impact of Regulatory and Digital Developments on Money Movement
The Saudi financial market has witnessed significant regulatory developments during 2024-2025, including facilitating foreign investor entry and offering new investment tools such as exchange-traded funds and sector funds. These developments have contributed to increasing market depth and attracting new liquidity from within and outside the Kingdom. Additionally, digital transformation has facilitated trading and money transfer operations through electronic platforms, enhancing the speed and efficiency of money movement between investors and companies. The Capital Market Authority (CMA) plays a pivotal role in regulating and developing the digital infrastructure of the market, establishing regulations to protect investors and ensure transparency. This evolving regulatory and digital environment supports liquidity sustainability and makes the Saudi financial market more attractive to local and international investors.
Key Challenges Related to Money Management in the Saudi Market
Despite the positive developments in the Saudi financial market, there are ongoing challenges facing money and liquidity management. Among the most prominent of these challenges are:
- Volatility in global oil prices and its direct impact on local liquidity.
- Changes in global and local monetary policies and their effect on interest rates and financing costs.
- Intense competition among financial institutions to attract customer deposits, which may affect return levels and risks.
- The continuous need to update systems and regulatory frameworks to keep pace with new financial innovations and digital technologies.
- Risks associated with market volatility and lack of transparency in some cases, which may affect investor confidence.
- Challenges related to attracting foreign investments and maintaining the stability of the riyal in the face of global changes.
These challenges require flexible strategies for money management, emphasizing the importance of adhering to best practices in governance and financial transparency.
Investment Opportunities and the Role of Money in Achieving Economic Growth
Money plays a pivotal role in financing new projects and supporting economic development plans in the Kingdom of Saudi Arabia, especially under Vision 2030. Abundant liquidity allows both the public and private sectors to implement major projects in energy, infrastructure, technology, and tourism. The Saudi financial market also provides diverse investment opportunities for investors, whether through stocks, bonds, or investment funds. The growth of financial liquidity enhances companies' ability to expand and increase their profits, positively reflecting on the macroeconomy. Additionally, government initiatives such as injecting funds from public investment funds support sustainable growth and provide more opportunities for local and foreign investors. In this context, money is the primary means to achieve the desired economic transformation and enhance the position of the Saudi market regionally and globally.
Latest Developments in the Saudi Money Market (2024-2025)
The Saudi financial market has witnessed several significant developments during 2024 and 2025 that have affected the movement of money and liquidity. Among the most notable are:
- A remarkable jump in the general market index (TASI) by 5.1% in one day during September 2025, driven by expectations of easing foreign ownership rules.
- The market capitalization of listed stocks surpassed 10 trillion riyals for the first time at the end of 2024, with continued growth throughout 2025.
- The average price-to-earnings ratio (P/E) stabilized between 15-18 times by the end of 2024, with a dividend yield ranging between 3-4% annually.
- Growth in profits for companies in sectors such as banking (by 8-10%) and petrochemicals (over 5% quarterly growth for some companies).
- An increase in the money supply (M2) by 6% annually, reflecting the strength of liquidity in the local economy.
- The launch of new investment funds and the expansion of digital trading tools.
- Strengthening digital infrastructure, facilitating trading and financial transfers.
These developments confirm the vitality of the Saudi financial market and the role of money in supporting economic and investment growth.
Frequently Asked Questions About Money in the Saudi Financial Market
There are many questions surrounding money in the Saudi financial market that concern both investors and individuals alike. Among the most important of these questions are: What is the difference between money (liquidity) and stocks in evaluating investments? How do interest rates and oil prices affect liquidity? What financial indicators should be monitored? How can one balance saving and investing? We will dedicate a detailed section to answer the most common questions with comprehensive explanations for each point, to help the reader form a complete understanding of money and its role in the Saudi financial market.
Conclusion
Money is the backbone of the economy and the Saudi financial market, representing the primary means for financing investments and supporting the growth of companies and markets. By understanding the nature of money and its forms, and its role in driving liquidity and determining asset values, investors can assess the investment environment and make financial decisions based on sound foundations. Recent economic and regulatory developments in Saudi Arabia, especially in the areas of digitization and openness to foreign investments, enhance market dynamics and make it more attractive for both local and global liquidity. However, prudent money management while considering challenges and risks remains essential for the success of any financial strategy. The SIGMIX platform offers in-depth educational and analytical content on money in the Saudi market and always emphasizes the importance of consulting a licensed financial advisor before making any investment decisions to ensure alignment with personal goals and financial situations.
Frequently Asked Questions
Money refers to assets that can be quickly converted into cash, such as cash or bank balances, while stocks represent ownership shares in listed companies. When investing, money is used to purchase stocks or other financial assets, while stocks allow the investor to benefit from company profits and capital growth. Liquidity provides the flexibility to respond to opportunities or face emergencies, while stocks carry higher profit potential and relatively higher risks. Managing the balance between liquid money and investing in stocks depends on the investor's goals and risk tolerance.
To preserve the purchasing power of money with an annual inflation rate (e.g., 2%), part of the liquidity should be directed towards investing in assets that appreciate in value or yield higher returns than inflation, such as purchasing shares of large dividend-paying companies, investing in income-generating funds, or even real estate and gold. Government bonds and sukuk provide fixed returns that help overcome inflation. Diversifying money between saving and investing achieves balance and protects against long-term value erosion.
Interest rates set by the Monetary Authority affect the attractiveness of saving versus investing. Raising interest rates encourages bank saving and reduces liquidity flowing into financial markets, while lowering them stimulates spending and investment in stocks and risky assets. During 2024-2025, the stability of interest rates supported liquidity stability, with investors continuing to distribute money between bank deposits and financial investments based on risk returns.
The return on money can be estimated through two main indicators: the price-to-earnings ratio (P/E), which measures the ratio of the stock price to the company's annual earnings, and the dividend yield, which represents the ratio of distributed profits to the stock price. By combining the dividend yield with capital gains (price increases), the investor obtains the total return on their investment. Monitoring these indicators helps in assessing the expected performance of money invested in stocks.
Key indicators include: market capitalization of listed stocks, price-to-earnings ratio (P/E), dividend yield, revenue and profit growth, daily trading volume, and money supply ratio (M2). These indicators reflect the volume of liquidity, market efficiency, and investment attractiveness, helping investors monitor performance and make informed financial decisions.
Rising oil prices increase state revenues, which is reflected in injecting greater liquidity into the economy, banks, and the financial market. Conversely, a decline limits available liquidity and may negatively affect market activity. The stability of the riyal against the dollar protects against currency fluctuations and provides additional confidence to local and foreign investors, but it does not insulate the market from the effects of oil price volatility on liquidity.
Risks include: stock price volatility, changes in interest rates, liquidity risks (difficulty in quickly liquidating assets), sudden regulatory changes, and macroeconomic risks such as inflation or declining oil prices. Diversifying investments and maintaining a liquidity reserve are among the best practices for managing these risks.
Bank saving provides security and a fixed return but is often lower than inflation, while investing in stocks offers the opportunity for higher returns with greater risks. It is advisable to distribute money between the two according to personal goals, ensuring that savings cover emergency needs and provide stability, while targeting investment in stocks for capital growth and higher long-term returns.
The financial sector, led by banks and investment institutions, manages the flow of money by receiving deposits, providing loans, managing funds and investment portfolios, and facilitating the trading of securities. The development of the financial sector and increased competition among banks and investment firms enhance the efficient use of money and deepen the Saudi financial market.
Digital developments have accelerated trading and money transfer operations, with easy access to financial products through electronic platforms. Regulatory updates, such as facilitating foreign investor entry and offering modern investment tools, have enhanced liquidity and attracted new funds, increasing market dynamism and making it more competitive and attractive.