The Index in the Saudi Financial Market: In-Depth Explanation and Recent

The index in financial markets is a numerical measure that reflects the average performance of a group of stocks or bonds on a specific exchange. In the Kingdom of Saudi Arabia, the "TASI" (Tadawul All Share Index) is the main index that measures price changes of stocks listed in the main market. The index is calculated based on the market capitalization of free-floating shares, meaning shares available for public trading without accounting for large non-tradable holdings. The index aims to provide a comprehensive picture of market performance, serving as a reference for investors to evaluate general trends rather than tracking each stock individually. In addition to TASI, there are sector indices for sectors such as banks, petrochemicals, and basic materials, as well as indices for the parallel market like the "NOMU" index. All these indices are approved by the Capital Market Authority and the Tadawul, and are essential tools in financial analysis and investment decision-making. It is worth noting that the index does not necessarily reflect the performance of every company accurately; rather, it is a weighted average that can be significantly influenced by movements of large-cap companies. Therefore, the index is closely linked to the Saudi economy and government policies, and is also used in constructing investment funds that track the overall market movement.

The Saudi financial market includes several types of indices, each serving a specific purpose in analysis and comparison. First, there is the general market index "TASI," which includes all companies listed in the main market and is calculated on a market-capitalization-weighted basis. Second, there are sector indices dedicated to measuring the performance of specific sectors such as banks, energy, basic materials, and telecommunications. These indices help track sector movements and understand their contribution to overall market performance. Third, the parallel market index "NOMU" includes companies listed in the NOMU market with simplified listing requirements. Fourth, there are sub-indices like "MT30," which includes the largest 30 companies by liquidity and market capitalization. Fifth, there are international indices like MSCI and FTSE that integrate some Saudi companies into emerging market indices, allowing global investors to monitor the performance of the Saudi market within a broader context. All these indices provide investors with diverse options for analyzing the market and comparing the performance of companies or sectors against different benchmarks.

The index in the Saudi market is calculated using a free-float market capitalization methodology. This means that each listed company contributes to the index with a weight proportional to the size of its available shares for trading and its market price. The market values of all free-floating shares of listed companies are summed and then divided by a fixed base value representing the index's base year. The index value is updated in real-time during trading sessions to reflect any changes in prices or the number of free-floating shares. The importance of the index lies in its role as a benchmark for measuring overall market performance, used by investors, investment funds, and decision-makers to track trends, assess risks, and compare performance with previous periods or international indices. The index is also used in building investment products like exchange-traded funds (ETFs), allowing investors to invest in the market as a whole without the need to select individual stocks.

The index in the Saudi market is influenced by several variables, including macroeconomic factors such as oil prices, local and global monetary policies, and political developments in the region. Additionally, the results of major listed companies—particularly banks, petrochemical companies, and investment firms—play a pivotal role in index movements due to their weight in market capitalization. For instance, rising profits from a company like Aramco or Al Rajhi Bank may push the index higher, while declining profits from large companies or falling oil prices may pressure the index. Foreign capital flows, regulatory changes, and government initiatives like Vision 2030 and massive infrastructure projects also affect index performance. Finally, global market volatility, interest rates, and geopolitical tensions can quickly reflect on index movements, making its monitoring essential for understanding the overall market context.

The TASI index experienced volatile performance in 2024, ending the year at 12,036.50 points, up 0.58% from 2023. It reached a peak closing level of 12,835.65 points in March 2024, before gradually declining. In the first quarter of 2025, the index closed at 12,025.05 points, down 3.04% from the same period the previous year. This volatility was accompanied by a decrease in the total market capitalization of listed companies to 9,918.69 billion riyals at the end of the first quarter of 2025. The market also saw a decline in trading values, volumes, and the number of transactions, reflecting investor caution and a slowdown in liquidity at the beginning of 2025. This decline is attributed to external factors such as rising global interest rates and fluctuating oil prices, along with local variables related to major company results and government policies. Nevertheless, the market continued to attract high liquidity throughout 2024, with increased trading volumes and transaction numbers, indicating strong investor engagement despite the volatility.

Sector indices play a crucial role in analyzing the Saudi financial market, allowing investors to track the performance of specific sectors such as banks, petrochemicals, basic materials, telecommunications, and insurance. Each sector index is calculated based on the market capitalization methodology of the companies listed within the sector, providing an accurate measure of sector health and trends regardless of overall market performance. Sector indices help identify the fastest-growing or declining sectors and are used as a comparative tool for assessing the performance of companies within the sector. Portfolio managers rely on them to make asset allocation decisions among different sectors based on indicators of strength and weakness. In the context of cement companies like Hail Cement (3001), the basic materials sector index is used to evaluate the stock's performance relative to its competitors and determine how the company interacts with factors affecting the construction sector.

Hail Cement Company (Symbol: 3001) is considered a medium-sized company listed in the main Saudi market, belonging to the basic materials sector. The performance of Hail Cement's stock directly reflects in the general index (TASI) through its market capitalization weight, although its impact remains limited compared to larger companies. In recent years, the company has experienced a decline in profits, with first-quarter 2024 profits reaching approximately 15 million riyals, down 19% from the same period in 2023. The company has not announced significant dividends recently, reflecting market pressures on operating profits. Hail Cement's stock is influenced by factors such as production costs, domestic demand, energy prices, and changes in government construction policies. Despite its relative stability compared to some other cement stocks, the stock's performance remains tied to the sector's performance and the overall Saudi economy. For stock details, you can visit Hail Cement Stock Page.

The cement sector is considered a vital traditional sector in the Saudi economy, serving massive housing and infrastructure projects under the Kingdom's Vision 2030. The sector includes competing companies such as Arabian Cement, Southern Cement, Qassim Cement, and others, each covering different geographical areas. Demand for cement depends on the volume of government and private projects, while production costs and energy prices affect profit margins. In recent years, the sector has seen varied performance due to fluctuations in domestic demand and rising raw material costs. Cement companies face challenges such as high fuel prices and transportation costs, in addition to competition from larger companies with broader production capacities. Hail Cement's stock exemplifies medium-sized companies striving to improve operational efficiency to face these challenges. The sector remains sensitive to economic and regulatory changes, as any shift in housing policies or export incentives can quickly reflect on company performance and sector indices.

The Saudi market witnessed the introduction of several new regulations in late 2024 and early 2025 to enhance market attractiveness, such as raising the foreign ownership cap for certain companies and updating governance and financial transparency standards. These measures aim to increase foreign investment flows and expand the investor base, potentially supporting long-term index stability and deepening the market. On the other hand, economic developments such as fluctuating oil prices, monetary policies, and Vision 2030 initiatives directly affect index performance. For example, fluctuations in global interest rates led to a decline in market liquidity during the first quarter of 2025, while government projects supported some sectors during 2024. This dynamic reflects the importance of monitoring regulatory and economic changes to better understand index movements.

Indices are used as a basis for developing various financial products such as exchange-traded funds (ETFs), open-end mutual funds, and sector indices. These products allow investors to invest in a basket of stocks that reflect the performance of the index or a specific sector without the need to select individual stocks. In the Saudi market, several funds track the TASI index or sector indices, providing investors with flexibility in risk distribution and benefiting from general market trends. Indices are also used as a basis for futures contracts and options in advanced financial markets, and the Saudi market has gradually begun developing these products. These tools represent additional investment options that enhance market efficiency and provide broader liquidity for individual and institutional investors.

The index reflects overall market performance, but its movements are primarily influenced by large-cap stocks. While the performance of individual stocks like Hail Cement (3001) contributes to the index based on their weight, the larger companies in sectors like banking and energy exert a greater impact. A rise in an individual stock may not significantly affect the index unless it is among the largest companies. Conversely, index movements can reflect overall investor confidence, which psychologically impacts individual stock performance. The index is also used as a benchmark for measuring the performance of portfolios and investment funds, where investors compare their returns against the index's growth rate. It is important to recognize that a rising index does not necessarily mean all stocks are increasing, as some stocks may perform better or worse than average depending on their specific circumstances.

The TASI index is a sovereign index specific to the Saudi market and serves as a primary reference for local investors. In contrast, there are international indices like MSCI for emerging markets and FTSE that include some Saudi companies within a broader basket of global companies. Global indices reflect market performance within an international context, allowing investors to compare the Saudi market with other markets. Saudi Arabia's inclusion in indices like MSCI since 2019 has helped attract foreign investments and increase liquidity in the local stock exchange. Nevertheless, the TASI index remains the most accurate measure of the dynamics of the Saudi market, while global indices are used to assess the attractiveness of the Saudi market to international investors and compare its performance with other markets in the region and the world.

The index is a central tool for tracking general market trends and assessing risks and opportunities. It helps investors determine whether the market is in an upward or downward trend, providing a reference for comparing the performance of stocks or funds against the overall market. Monitoring the index allows investors to make decisions based on macro data rather than solely relying on individual stock performance. Portfolio managers also use the index to allocate assets among different sectors based on sector index performance. Despite the importance of the index, investors should not rely on it alone, but should integrate it with fundamental and technical analysis of targeted stocks and sectors. Consulting a licensed financial advisor remains a crucial step in understanding the implications of the index and effectively employing it in an investment strategy.