Saudi Financial Market: A Comprehensive Overview of Its Evolution and Importance

The Saudi financial market, known as 'Tadawul', is the official market for trading stocks and securities in the Kingdom of Saudi Arabia. Established in the 1980s as a limited manual trading system, it later evolved to become the largest financial market in the Middle East and North Africa. The market underwent a qualitative leap with the establishment of the Capital Market Authority in 2003, where regulatory oversight was integrated, and the infrastructure was updated to include full electronic trading. Today, the Saudi financial market is managed by the Saudi Exchange, and is overseen by the Capital Market Authority, which sets the regulatory and supervisory rules. In recent years, the market has seen the entry of new sectors and the launch of the parallel market (Nomu) to encourage the listing of small and medium-sized enterprises, along with the introduction of modern financial instruments such as index funds and derivatives. This ongoing development has made the Saudi financial market a focal point for both local and international investors, especially after the listing of giant companies like Saudi Aramco and its inclusion in global emerging market indices.

The Saudi financial market consists of two main markets: the main market (Tadawul) and the parallel market (Nomu). The main market includes major companies that meet strict requirements in terms of capital, financial disclosure, and governance. By the end of 2024, the number of listed companies in this market exceeds 210, covering various sectors such as energy, banking, telecommunications, and industry. The Nomu market was launched in 2017 to facilitate the listing of small and medium-sized enterprises under less stringent conditions, currently hosting around 30 to 40 companies. Trading in both markets occurs through the same electronic system, but the listing and disclosure criteria differ. This structure provides investors with diverse options and offers a suitable platform for startups to grow and raise capital. Furthermore, the Saudi financial market offers additional investment tools such as exchange-traded funds (ETFs) and real estate investment trusts (REITs), allowing for portfolio diversification and risk management.

The Saudi financial market plays a pivotal role in financing the national economy and supporting the Kingdom's Vision 2030. It enables large and medium-sized companies to raise capital through public offerings and secondary issuances, allowing them to implement expansion and development projects. The financial market is also a key indicator of investor confidence and expectations regarding the local economy, especially with the significant transformations taking place in the Kingdom in renewable energy and non-oil industries. Additionally, the market contributes to the movement and distribution of liquidity among various sectors, providing investment opportunities for individuals and institutions, thereby enhancing the diversity of national income sources. The collaboration between the financial market and the Public Investment Fund and other government entities supports the execution of massive strategic projects such as renewable energy initiatives and new urban developments, positively impacting the macroeconomy and increasing the market's attractiveness to local and international investors.

The Tadawul All Share Index (TASI) reflects the performance of the Saudi financial market, tracking the movement of all stocks listed in the main market. At the beginning of 2025, the TASI index recorded approximately 12,025 points, a decrease of 3.04% compared to the previous year. The indices experienced notable fluctuations during 2024–2025, influenced by global variables such as oil price movements and regional economic events. The market saw a strong rise in September 2025 following the announcement of eased restrictions on foreign ownership, pushing the index to its highest levels in five years. The average daily trading volume ranged between 20 and 30 billion Saudi Riyals during active periods, while the total annual trading volumes hovered around 3–4 trillion Riyals in 2024. The total market capitalization of all listed companies is estimated at approximately 25–30 trillion Saudi Riyals, with energy and banking companies accounting for the largest share of market capitalization.

The Saudi financial market is divided into several main sectors, including: the energy sector (oil, gas, and petrochemicals), banking and financial services, telecommunications, utilities, and industry. The energy sector is the largest in terms of market capitalization, thanks to companies like Saudi Aramco (symbol 2222) and SABIC. Following it is the banking sector, which includes major institutions such as the National Commercial Bank and Al Rajhi Bank. The telecommunications sector includes companies like Saudi Telecom Company (STC), Mobily, and Zain. There are also active sectors such as insurance, real estate, and manufacturing. This sectoral diversity provides extensive opportunities for investors and contributes to market stability and risk distribution. The market features leading companies that represent a significant portion of the overall index and directly influence its performance, especially during periods of economic volatility.

Saudi Aramco (symbol 2222) is the largest listed company in the Saudi financial market and the world in terms of market capitalization. The price of Aramco's share in late 2025 was around 28–34 Saudi Riyals, with an estimated market value of approximately 3.3 trillion Riyals. The price-to-earnings ratio ranges between 9–11 times, and the annual dividend yield is about 8–10%, making it one of the highest-yielding companies among leading firms. In the third quarter of 2024, the company recorded a net profit of approximately 38 billion Riyals, with total revenues estimated at 300 billion Riyals. Aramco's profits and revenues saw a relative decline in 2023–2024 compared to the peak in 2022 due to falling global oil prices; however, the company continued its expansion strategies and investments in refining and petrochemical projects, supporting the sustainability of its future performance.

The Saudi financial market has witnessed a significant increase in the number of individual and institutional investors, with the number of active trading accounts exceeding 500,000 accounts by mid-2025. Current regulations allow foreign investors to own up to 49% of the shares of any listed company, with discussions underway to raise this limit in the near future. The market attracts foreign investors due to its large size, high liquidity, and the absence of taxes on capital gains. The Capital Market Authority continuously seeks to facilitate the entry of international investors by updating regulations and integrating the market into global emerging market indices such as MSCI and FTSE. These steps are part of the Kingdom's strategy to attract foreign capital and support economic diversification plans.

The Saudi financial market offers a variety of investment tools, including stocks, exchange-traded funds (ETFs), and real estate investment trusts (REITs). Derivative instruments such as futures contracts for gold and oil have also been introduced, allowing investors to manage risks and diversify their portfolios. Any qualified local or foreign investor can open a brokerage account with a licensed broker and then trade electronically through the trading platform. The market does not impose taxes on profits or cash distributions, while fees are limited to a small percentage of the transaction value. Some investors prefer long-term strategies focusing on leading stocks with regular distributions, while others engage in short-term trading or invest in funds to diversify risks.

The Capital Market Authority plays a fundamental role in regulating and monitoring the Saudi financial market, establishing rules for company listings, financial disclosures, and governance. In recent years, the Authority has issued several updates aimed at enhancing transparency, protecting investors, and ensuring fair trading. These updates include requiring companies to report quarterly, implementing governance rules, and facilitating public offering procedures. Additionally, there has been a tightening of oversight on insider trading and preventing price manipulation. The Authority collaborates with the Saudi Exchange to develop the market's infrastructure, introduce advanced electronic trading systems, and provide informational platforms to improve the investor experience and enhance market efficiency.

The Saudi financial market has witnessed numerous developments recently, including the initiation of consultations to raise the ceiling on foreign ownership, full inclusion in global emerging market indices, and the registration of initial public offerings for new companies in the technology and real estate sectors. The market has also launched new trading platforms for futures contracts and financial derivatives, along with the development of electronic disclosure platforms. In terms of performance, the overall index was affected by fluctuations in oil prices and changes in the global economy, while some sectors such as banking and insurance recorded profit growth due to the expansion of loans and rising interest rates. These developments reflect the dynamism of the Saudi market and its ongoing efforts to enhance its investment attractiveness.

The performance of the Saudi financial market is influenced by several key factors, the most important of which are global oil prices, which are closely linked to the profits of leading companies and state revenues. Government policies, economic transformation programs, and the massive investments of the Public Investment Fund also impact the market's trajectory. Regional and international events, such as geopolitical changes or global financial crises, play a role in determining confidence trends and the volume of liquidity flowing into the market. Additionally, the market is affected by developments in non-oil sectors such as banking, telecommunications, and manufacturing, which have gained increasing weight within the overall index.

Understanding financial indicators is essential for analyzing stock performance in the Saudi financial market. Key indicators include the price-to-earnings ratio (P/E Ratio), which measures the relationship between the stock price and the company's earnings, and the dividend yield, which indicates the annual return percentage for the investor. These indicators should be compared among similar companies in the same sector to understand the attractiveness of the stock. Investors also consider revenue and profit growth, capital structure, debt levels, as well as distribution policies and management. The trading platform and the Capital Market Authority provide periodic financial reports to assist investors in making informed decisions, emphasizing the need not to rely on a single analysis without careful study of the market.

Like any financial market, investing in the Saudi financial market carries both opportunities and risks. Opportunities include the large market size, high liquidity, absence of taxes on profits, and a variety of available financial instruments. Risks include fluctuations associated with oil prices, volatility of the overall index due to global events, and sector or company-specific risks. It is always advised to diversify the portfolio and not to concentrate on a single stock or sector, while continuously monitoring financial news and company reports. Investors should recognize that market performance is constantly changing and that investing carries the potential for both profits and losses; therefore, it is essential to consult licensed financial professionals before making any investment decisions.