Pure Stocks in the Saudi Financial Market: A Comprehensive Guide

Pure stocks are shares of companies that strictly adhere to Islamic Sharia standards and regulations in all their financial and commercial activities. These companies must not engage in or derive profits from prohibited activities or transactions, such as usury (bank interest), gambling, selling alcohol, tobacco, or other illegal activities. Additionally, the company should not rely on interest-based bank financing or have loans with interest exceeding very minimal percentages of capital or assets. Its income sources must be entirely permissible.

Pure stocks are subject to continuous monitoring by Sharia boards and financial experts to ensure ongoing compliance with Sharia. Some specialized entities issue updated lists of pure stocks based on the periodic financial reports of listed companies. Investing in these stocks has an ethical character, as investors seek to achieve profits without violating Sharia teachings, reinforcing the principle of Sharia safety in financial decisions. The cement sector is one of the most prominent sectors hosting this category of stocks, as is the case with Hail Cement (3001).

The classification of pure stocks in the Saudi financial market is subject to precise criteria established by Sharia scholars and financial market experts. Among the most prominent of these criteria:

1. Riba Debt Ratio: The ratio of loans or obligations with bank interest must not exceed a certain percentage of capital or total assets (usually less than 33%).
2. Prohibited Revenue Ratio: Revenue derived from prohibited sources (such as bank interest or riba investments) must not exceed a specified percentage of total revenue (usually between 5-10%).
3. Nature of Activities: The company's core activity must be entirely permissible, such as halal manufacturing or non-prohibited services. Companies that sell prohibited products or provide illegal services are excluded.
4. Cash Liquidity and Investments: The company should not rely on holding large amounts of money in interest-bearing bank accounts or investing in financial instruments that are not Sharia-compliant.

These criteria are reviewed periodically based on annual and quarterly financial reports. Updated Sharia lists are issued to guide investors to stocks that comply with these regulations. The importance of these lists lies in facilitating the investment decision-making process according to Sharia principles.

Stocks in the Saudi financial market are divided into three main categories based on Sharia compliance:

1. Pure Stocks: These are shares of companies that fully comply with Islamic Sharia provisions, without any prohibited transactions or income sources. These stocks represent the preferred choice for investors seeking Sharia reassurance.
2. Mixed Stocks (or Partially Compliant): These belong to companies that derive most of their income from permissible activities, but a small portion of their revenues may come from sources that are subject to Sharia dispute (such as limited bank interest). In this case, investment is allowed provided that the proportion of the prohibited income is purified and donated.
3. Prohibited Stocks: These pertain to companies whose activities or profits predominantly come from illegal sources, such as traditional banks or gambling and alcohol companies. Sharia investment in them is prohibited.

Accurate classification of companies is essential, as the degree of Sharia compliance varies from one company to another, even within the same sector. In this context, the importance of reviewing Sharia lists and consulting approved financial reports is highlighted.

Investing in pure stocks carries significant implications that extend beyond mere financial aspects. For the Muslim investor, this type of investment achieves a synergy between economic return and religious commitment. It ensures that the invested capital does not contribute to prohibited activities or violate the Sharia principles governing financial transactions.

Additionally, investing in pure stocks provides a sense of confidence and peace of mind, as the investor avoids doubts and usury. The commitment of pure companies to financial transparency and governance enhances their credibility in the market.

Economically, many pure companies have shown strong performance in recent years, especially in industrial and service sectors. Pure stocks emerge as an attractive option amid increasing demand for halal products and services, along with growing societal awareness of the importance of Islamic financing.

However, it is always advisable to periodically verify Sharia compliance and consult certified financial specialists to ensure the right choice and avoid unwanted risks.

Data for the years 2024–2025 indicate a growing interest in pure stocks in the Saudi market, despite the limited number of companies listed under this classification. According to recent Sharia reports, the number of fully pure companies has not exceeded a few dozen out of the hundreds of companies listed in the market.

Pure stocks are often concentrated in basic materials sectors, such as cement, manufacturing, and some food companies. These companies have shown strong financial performance in 2023 and 2024, with some cement stocks, including Hail Cement (3001), experiencing price growth exceeding 100% within one year, stabilizing in 2024 at record levels. They also recorded high dividend distributions ranging between 6% and 8% of the stock price.

This performance is attributed to the increased local demand for products from pure sectors, driven by government infrastructure projects under Vision 2030. The average daily trading in the Saudi market indicates continued activity, with a notable contribution from basic materials stocks to the overall index growth.

Hail Cement stock (3001) is one of the most prominent examples of pure stocks in the Saudi market, as the company fully adheres to Sharia standards in its activities and financial operations. The company operates in the production and distribution of cement without any usurious transactions or investments in prohibited activities.

The company's stock has seen significant growth during 2023 and 2024, rising from levels of 100–120 SAR to over 260 SAR per share by early 2025. This growth positively reflected on the company's market value, which reached approximately 50–60 billion SAR.

Financially, the price-to-earnings ratio of the stock is around 15–20 times, a ratio that reflects investors' confidence in the company's sustained profitability, especially given the generous cash distributions that reached 15–20 SAR per share in 2023 and 2024, equivalent to 6–8% of the stock price. All these indicators affirm Hail Cement's position among the leading pure stocks in the Saudi market.

For more, you can visit the Hail Cement stock page (3001): /stocks/3001/.

The industrial sector, particularly the cement sector, features a relatively abundant number of pure companies compared to other sectors such as banking or financial services. This is attributed to the nature of industrial activities that distance themselves from sources of prohibited income, relying on the production and distribution of basic goods.

Among the key opportunities in this sector:
- Increasing demand for construction materials due to massive infrastructure projects under Saudi Vision 2030.
- Benefiting from government policies supporting national industry, such as imposing temporary protective tariffs on imported products.
- Growing interest in environmental sustainability and energy efficiency, enhancing the competitiveness of pure industrial companies.

Challenges include:
- Fluctuations in energy and raw material prices.
- Increasing production capacity with the introduction of new production lines, which may lead to oversupply and pressure on prices.
- The ongoing need for innovation and cost control to maintain profit margins.

Pure industrial companies, such as Hail Cement, remain well-positioned to capitalize on opportunities, provided they continue to adhere to Sharia and financial standards.

To verify the purity of any stock in the Saudi market, investors can use several means:

1. Approved Sharia Lists: Issued by independent Sharia boards or experts, such as Sheikh Mohammed Al-Osimi's lists, these display the classification of stocks as pure, mixed, or prohibited based on the latest financial data.
2. Reviewing Financial Reports: By examining the company's annual and quarterly financial statements, especially debt items and non-operating revenues, one can assess the company's compliance with Sharia regulations.
3. Utilizing Specialized Financial Platforms: Some platforms and financial institutions provide updated classifications of pure stocks, along with detailed analyses of companies' financial positions.
4. Consulting a Financial Advisor or Sharia Board: It is always advisable to refer to licensed Sharia or financial specialists to ensure the accuracy of the classification and avoid falling into doubts.

These steps help investors make decisions based on reliable foundations and avoid the Sharia risks associated with investing in mixed or prohibited stocks.

Investors have several options when wishing to invest in Sharia-compliant assets:

1. Direct Investment in a Pure Stock: This allows purchasing shares of specific companies that meet Sharia standards, such as Hail Cement (3001). It requires the investor to monitor the company's performance periodically and bear the full results of profits or losses.
2. Investment Through Islamic Index Funds: These are investment funds that include a diversified portfolio of pure and compliant stocks. These funds offer the advantage of diversification and risk reduction, as they are managed by financial experts who update the portfolio and perform Sharia purification as needed.

The choice between the two methods depends on the investor's experience and their desire to manage their portfolio independently. Direct investment provides greater control, but funds offer diversification and protection from the fluctuations of a specific stock, along with ease of monitoring Sharia compliance.

Although pure stocks provide Sharia reassurance to investors, they do not exempt them from the financial risks associated with any stock investment. Among the most notable risks:

1. Price Fluctuations: The prices of pure stocks are linked to general market factors, such as supply and demand, sector performance, and macroeconomic changes.
2. Operational Risks: Pure industrial companies face challenges such as rising operating costs or declining demand for their products, which affects profits.
3. Sector Risks: In the cement sector, for example, increased production capacity or the entry of new competitors may pressure prices and profit margins.
4. Regulatory Risks: Any changes in government policies or energy support can impact the operational efficiency of companies.

Therefore, it is important for investors to balance Sharia reassurance with financial risk analysis, emphasizing the importance of consulting financial specialists before making investment decisions.

Official Sharia lists play a pivotal role in guiding investors in the Saudi market towards pure stocks. These lists are issued by Sharia authorities or certified financial experts and are subject to periodic review based on the latest financial data and company reports.

These lists provide a clear classification for each stock: pure, mixed, or prohibited, with a brief explanation of the classification rationale. Many investors rely on these lists to build their investment portfolios without needing to examine each company individually.

Sharia lists contribute to enhancing transparency and reducing the risks of falling into doubts, especially for individual or non-specialized investors. They also keep pace with changes in company conditions, ensuring the ongoing Sharia compliance of investment portfolios over time.

The pure stocks sector in Saudi Arabia has witnessed notable developments during 2024 and 2025. Among the most important are:

- Several pure companies, led by Hail Cement, announced strong financial results and profit growth exceeding 20% annually in some cases, driven by increased demand for construction materials.
- New production expansions in the industrial sector, with Hail Cement obtaining approvals to build a fourth baking unit to increase production capacity by over 20%.
- Continued government policies supporting national industry, such as imposing protective tariffs on imports, enhancing the competitiveness of local products.
- Commitment of pure companies to environmental sustainability standards, launching projects to improve energy efficiency and reduce emissions.
- Stability of credit ratings for pure companies at high levels, reflecting the strength of their financial positions.

All these developments enhance the attractiveness of the pure stocks sector for investors seeking Sharia compliance alongside strong financial performance.

In rare cases, a pure company may generate a small income from an illicit source (such as bank interest on account balances). In this case, Sharia fatwas recommend a financial purification mechanism, meaning that a percentage of the prohibited income should be extracted and donated without considering it part of the investor's profits.

The purification process is carried out according to a specific percentage that equals the investor's share of the illicit revenues. Most pure companies strive to minimize this percentage to the lowest possible level or eliminate it altogether to ensure the continuity of their pure classification.

This mechanism helps address any financial doubts and provides the investor with additional reassurance when investing in pure stocks, while adhering to Sharia regulations in all circumstances.

Investing in pure stocks requires a careful balance between Sharia compliance and analyzing the financial aspects of the company. Investors are always advised to:

- Regularly monitor updated Sharia lists.
- Review financial reports of companies and verify income sources and debts.
- Consult with a certified financial or Sharia advisor to evaluate opportunities and risks.
- Diversify the investment portfolio and not focus on a single stock.
- Understand the nature of the sector to which the company belongs and analyze its future trends.

These steps contribute to reducing risks and enhancing financial success opportunities while maintaining Sharia compliance. It is always worth noting that the information provided in this article is for educational purposes only and does not substitute for specialized professional consultation.