Global Financial Markets: Concept, Impact, and Role of Saudi Market

Global financial markets are an interconnected international system that includes stock markets, bond markets, foreign exchange (forex), commodities, and financial derivatives. These markets facilitate the trading of financial assets among participants from around the world, contributing to capital aggregation, project financing, and widespread risk distribution. These markets are not confined to a single geographical area; rather, they overlap and influence each other across borders, making them susceptible to fluctuations resulting from international economic and political events. Notable examples of global market indices include the U.S. S&P 500, Japan's Nikkei, the UK's FTSE, and Germany's DAX, which reflect the performance of broad sectors of the global economy. Additionally, global markets play a crucial role in pricing essential commodities such as oil and gold and determining global currency rates, making them a focal point for investors and economic decision-makers in all countries.

Global financial markets are divided into several main types, each serving a specific role in the international financial system:

1. Stock Markets: Where shares of listed companies are traded, playing a fundamental role in financing companies and providing liquidity for investors.
2. Bond Markets: Allow governments and corporations to raise funds through the issuance of short- or long-term debt instruments.
3. Foreign Exchange Markets (Forex): The largest in terms of daily trading volume, determining global currency exchange rates.
4. Commodity Markets: Include trading in oil, gold, industrial metals, agricultural products, and more.
5. Derivative Markets: Involve trading futures contracts, options, and other derivatives that help manage risk and hedge.

These markets are interconnected, and their outcomes affect one another, creating a globally linked financial system that investors and economic policymakers continuously monitor.

Global financial markets are influenced by several key factors, including:

- Monetary policies of major central banks such as the U.S. Federal Reserve and the European Central Bank, especially decisions regarding interest rate hikes or cuts.
- Global commodity prices, particularly oil and gold, where their movements affect the revenues of exporting countries and industrial sectors.
- Economic or geopolitical crises, such as trade wars or regional conflicts, which may lead to sharp market fluctuations.
- Inflation rates and economic growth in major and emerging economies.
- Changes in international investment flows, where decisions by large investors (such as sovereign wealth funds) affect capital movements between markets.

All these factors collectively contribute to shaping the global financial landscape and determining market trends in the short and long term.

The Saudi economy is one of the most interconnected with global financial markets for several reasons:

1. The Saudi riyal's peg to the U.S. dollar, making U.S. monetary policies (especially interest rates) directly impact the Saudi financial environment.
2. The Saudi budget's primary reliance on oil exports, making global oil prices a key determinant of government revenues.
3. The opening of the Saudi financial market (Tadawul) to foreign investments after its inclusion in emerging market indices like MSCI, leading to massive financial inflows and a shift in local investment rules.
4. The impact of global liquidity and international investor trends on the performance of Saudi stocks, especially in leading companies.

These factors make it essential for local investors to monitor global developments and analyze their implications for the Saudi market and listed companies.

The Saudi financial market (Tadawul) has witnessed significant developments in recent years, having been included in global emerging market indices in 2019, which prompted substantial foreign investment inflows. The overall market capitalization has notably increased, surpassing historical levels by the end of 2024, supported by leading companies like Saudi Aramco. Additionally, the general market index (TASI) experienced notable growth in the range of 10-15% during 2024. This openness to global markets has enhanced market transparency and raised governance standards, helping attract global capital to diverse sectors, including the cement and basic materials sector.

The global economy experienced performance variations during 2024 and 2025 due to the ongoing effects of the COVID-19 pandemic and rising inflation rates. According to estimates from international institutions, the global economy grew by approximately 3% in 2024, with moderate growth expected in 2025. Prices for major commodities such as oil (Brent crude between $75–85 per barrel) stabilized, supporting the economies of exporting countries and improving their revenues. On the other hand, major central banks maintained a tight monetary policy for most periods, with expectations of a shift towards interest rate cuts in 2025. These developments reflected on stock and bond markets, which saw a gradual return of confidence and relative stability, especially in major economies.

The cement sector is one of the vital sectors in the Saudi economy, playing a pivotal role in executing infrastructure projects and Vision 2030 initiatives such as NEOM and the Red Sea projects. The cement sector in Saudi Arabia is characterized by the presence of several large national companies competing in the local market, while globally, the sector relies on demand from construction and urban expansion projects. Conversely, the cement sector faces challenges such as rising energy costs and the need to develop strategies to reduce carbon emissions. Nevertheless, the sector continues to receive government support and increasing investments to meet the massive local demand and achieve national development goals.

Hail Cement Company is a Saudi joint-stock company established in 2010 with an industrial investment license, engaged in the production of cement and supplying its products to meet the growing local demand. The company is listed on the Saudi financial market (Tadawul) under the symbol 3001. Its market value, according to the latest updates, is approximately 1,136 million Saudi riyals. The company has witnessed significant strategic developments recently, such as announcing an acquisition deal by Qassim Cement Company, which led to the suspension of trading on its shares and the unavailability of an active price currently. This example illustrates how changes in the structure of local companies can be influenced by both global and local market trends.

Despite the recent suspension of trading on Hail Cement's shares due to the merger with Qassim Cement, the available financial data indicates the company's size and position within the sector. The company has not announced recent dividends or price-to-earnings (P/E) ratios due to acquisition circumstances. Financial statements show a market value of approximately 1.136 billion riyals, with the company continuing to issue periodic financial results, such as the first-quarter data for 2024. Investors are monitoring the impact of the acquisition on the company's results and future market share, with expectations that the merger with Qassim Cement will shape the sector in the coming years.

The Saudi cement sector includes several major companies, including Hail Cement, Qassim Cement, Yamama Cement, Southern Cement, Eastern Cement, and Arabian Cement. The sector is highly competitive, with these companies vying for government contracts and major infrastructure projects. Additionally, surplus production capacity at certain times has led to competitive pressures on prices and profit margins. The entry of companies into acquisition and merger deals, such as the Hail Cement and Qassim Cement deal, reflects a natural evolution aimed at enhancing efficiency and increasing competitiveness at the national and regional levels.

In late 2023 and early 2024, Hail Cement Company announced an acquisition agreement with Qassim Cement Company, involving the transfer of ownership of all Hail Cement shares to Qassim Cement through a share exchange deal. The extraordinary general assembly approved the deal, pending the completion of regulatory procedures. This led to the temporary suspension of trading on Hail Cement's shares, a common occurrence in such major deals. The company continued to issue periodic financial data, while the market awaits the implications of the deal on the sector and the financial and operational performance of the new entity.

The Saudi economy is directly affected by movements in global oil prices, as oil revenues constitute the majority of government revenues. The rise or fall in oil prices reflects on government investments, spending levels, and the performance of local companies. On the other hand, the Saudi riyal's peg to the U.S. dollar influences local monetary policy, making decisions by the U.S. Federal Reserve (such as raising or lowering interest rates) directly impact financing costs in the Kingdom. These factors make it essential to monitor global developments when analyzing the performance of the Saudi market and the companies listed within it.

Analyzing financial indicators such as market capitalization, price-to-earnings (P/E) ratio, dividends, and revenue growth is essential for understanding the performance of companies listed in the Saudi market. For example, when monitoring a company like Hail Cement (3001), knowing its updated financial data helps investors assess its competitive position within the sector. Additionally, following the results of local companies amid global changes, such as oil prices or monetary policies, provides a broader picture of future sector expectations and investment risks.