Saudi Stocks: A Comprehensive Guide to Understanding the Tadawul Market

The Saudi stock market (Tadawul) is the largest in the region in terms of market capitalization and the number of listed companies. The Capital Market Authority was established in 2003 as a regulatory body to organize and develop the market and support the objectives of Vision 2030 in diversifying the economy. The market consists of a main market attracting major companies like Aramco, SABIC, and large banks, and a parallel market (NOMU) focusing on small and medium enterprises. Tadawul manages the technical infrastructure, clearing, and settlement operations and offers modern services to investors.

All financial and regulatory activities are overseen by the Capital Market Authority, which imposes disclosure, governance, and investor rights protection requirements. In recent years, the Authority has launched initiatives to enhance transparency and introduced new rules such as facilitating foreign investor entry and governance updates. Consequently, the Saudi market is characterized by an advanced structure and increasing transparency, enhancing its appeal to both local and international investors.

The Tadawul All Share Index (TASI) is the main index of the Saudi stock market, measuring the performance of all companies listed in the main market. An increase in the index reflects an overall improvement in prices and market capitalization, while a decline indicates selling pressures or a downturn in the performance of major sectors.

In addition to TASI, there are sector indices covering specific sectors such as banking, energy, petrochemicals, telecommunications, and real estate. These indices allow investors to track the performance of specific sectors separately from the overall market. Data for 2024 showed that TASI reached record levels exceeding 11,250 points, driven by strong performance in the banking, energy, and telecommunications sectors. These indices serve as reference tools for investors when analyzing the market and determining its general trends.

The Saudi stock market includes more than 225 listed companies as of early 2025, distributed between the main and parallel markets. These companies span sectors such as energy, petrochemicals, banking, telecommunications, industry, and real estate. In 2024, the market witnessed the entry of new companies thanks to the facilitation of the Capital Market Authority and initial public offering (IPO) programs, supporting the growth of diverse economic sectors.

The Saudi market is characterized by a high concentration in certain sectors, with companies like Aramco, SABIC, and major banks holding a significant share of market capitalization. Nevertheless, the number of companies from emerging sectors such as technology and renewable energy is increasing. This diversity provides opportunities for various types of investors and reflects the dynamism of the Saudi economy under Vision 2030.

The Saudi stock market recorded unprecedented levels of market capitalization in 2024, exceeding a total market capitalization of 10 trillion Saudi Riyals by the end of the year. Saudi Aramco alone represents about one-third of this value, reflecting its weight in the market.

In terms of liquidity, the average daily trading volume in some periods exceeded 20 billion Riyals, a record figure compared to previous years. This reflects increased interest from individual and institutional investors, both locally and internationally. Electronic trading through digital platforms has also seen significant growth, facilitating the entry of a broader range of investors. This increase in liquidity and market capitalization reflects the success of government policies in enhancing market attractiveness and diversifying its investment base.

In recent years, there has been a notable increase in foreign investors' ownership of Saudi stocks. Since 2015, the Capital Market Authority has allowed qualified foreign investors to enter the market and has gradually lifted ownership restrictions, allowing foreigners to own up to 100% in some companies, especially in the parallel market.

According to official data, foreign ownership in the main market exceeded 20% by the end of 2024. This increase is attributed to international investors' confidence in the stability of the Saudi economy, the solvency of major companies, and economic reform policies under Vision 2030. The market continues to attract international capital thanks to the modernization of financial infrastructure and the facilitation of regulatory procedures. However, foreign investors are also subject to the oversight and requirements of the Capital Market Authority to ensure transparency and protect the market from speculation.

The listed companies in the Saudi stock market are distributed across several leading sectors, each with its characteristics and determinants:

1. Energy and Petrochemicals Sector: Led by Aramco and SABIC, it represents the backbone of the market and benefits from global oil prices and the expansion of industrial projects.
2. Banking and Financial Services Sector: Includes major banks such as Al-Rajhi, National Commercial Bank, and Alinma, benefiting from local economic growth and rising demand for financing and banking services.
3. Telecommunications and Information Technology Sector: Led by stc, characterized by continuous growth amid the expansion of 5G networks and data services.
4. Industry and Construction Sector: Includes cement, steel, and contracting companies, benefiting from government housing and infrastructure projects.
5. Renewable Energy Sector: With the entry of companies like ACWA Power, it reflects the Kingdom's direction towards diversifying energy sources.

This sectoral diversity helps distribute risks and provides multiple investment opportunities for investors.

Saudi Aramco is the largest listed company in the Saudi stock market and the largest oil company in the world by market capitalization. Since its listing at the end of 2019, Aramco has become a key player in the market index (TASI) and a major source of liquidity.

Aramco's financial data for 2024-2025 indicates stability in the stock price around 38 Riyals, with a market capitalization ranging between 8.5 and 9 trillion Riyals. Its annual dividends reached about 100 billion Riyals (an 11% dividend yield), with a price-to-earnings ratio between 10 and 15, and revenue growth exceeding 20% in the last quarter of 2024. These figures reflect the strength of the business model amid rising oil prices, alongside the company's expansion in refining and petrochemicals. Aramco also benefits from strong government support and a monopolistic position in the local oil market, making it a focal point for institutional and individual investors.

The performance of Saudi stocks is influenced by several key factors, including:

1. Global Oil Prices: Directly affect the profits of major companies, especially Aramco and SABIC.
2. Government Policies: Include decisions by the Capital Market Authority, privatization programs, and facilitation of foreign ownership.
3. Local Economic Conditions: Such as economic growth, inflation, interest rates, and Vision 2030 initiatives.
4. Geopolitical Developments: Regional or global tensions may lead to market volatility, especially in energy-related sectors.
5. Company Results: Any announcement of profits or dividends exceeding expectations may significantly move stock prices.
6. Foreign Capital Flows: Large purchases or sales by foreign investors affect liquidity levels and prices.

With the interaction of these factors, it is essential to follow economic news and official disclosures when studying the market.

The Capital Market Authority imposes a set of strict rules and regulations to protect investors and ensure fairness and transparency in the market. These rules include:

- Accurate disclosure requirements for listed companies regarding their financial results and future plans.
- Corporate governance through separating management from shareholders and forming independent audit committees.
- Monitoring unusual trading to detect manipulation or information leaks.
- Imposing penalties and fines on violators or manipulators in the market.
- Providing official channels for investors to submit complaints and inquiries.

The Authority has also launched awareness and education campaigns for investors about the risks of unstudied trading. Additionally, oversight of brokers and digital platforms has been enhanced to ensure the security of electronic transactions, which has boosted investor confidence and attracted new segments to the market.

The Saudi stock market witnessed high daily trading levels in 2024-2025, with the daily average exceeding 20 billion Riyals in some periods. This is attributed to the entry of new investors, the development of electronic trading platforms, and increased transparency in the market.

In terms of cash dividends, many Saudi companies are distinguished by offering high profit ratios to shareholders, especially in the energy, banking, and telecommunications sectors. Total cash dividends in 2024 reached about 500 billion Riyals, with Aramco's share exceeding 100 billion Riyals. This focus on profit distribution reflects the government's policy to support shareholders and attracts investors seeking periodic returns. However, it is worth noting that dividends depend on each company's annual performance results and may change according to economic conditions.

The public offering of companies (IPO) is one of the most important growth drivers of the Saudi stock market. In recent years, there has been an increase in the number of offerings thanks to the facilitation of the Capital Market Authority and privatization programs under Vision 2030. These offerings aim to attract new capital, expand the base of shareholders, and encourage companies to enhance transparency and efficiency.

Among the most notable recent offerings was the historic IPO of Aramco in 2019. The offerings also included companies from various sectors such as technology, industry, and insurance. The Capital Market Authority plays a pivotal role in reviewing the prospectus, ensuring fair distribution of shares, and monitoring companies' compliance with disclosure after listing. These IPOs contribute to diversifying market sectors and increasing its liquidity, positively reflecting on overall performance indicators.

The Saudi stock market has witnessed significant digital transformation in recent years, with the launch of advanced electronic trading platforms that facilitate buying and selling operations for individual and institutional investors. These platforms offer services such as real-time order execution, price tracking, electronic profit deposits, and periodic reports for investors.

Digital transformation has enhanced market efficiency and reduced trading costs, attracting new segments of youth and tech-savvy investors. The Capital Market Authority has also launched initiatives to support financial technology (FinTech) and encourage innovation in financial services. All these platforms are subject to the Authority's oversight to ensure the protection of investor data and the safety of transactions.

Despite strong growth and positive developments, the Saudi stock market faces some future challenges, including:

- Fluctuations in global oil prices that affect the profitability of major companies.
- The need for further diversification of listed sectors and reducing reliance on energy.
- Regional competition from other emerging markets in the Gulf.
- Geopolitical developments that may affect capital flows.

Conversely, there are significant growth opportunities, such as increasing investments in renewable energy, supporting tech companies, and facilitating foreign investor entry. Additionally, privatization programs and digital transformation provide a fertile environment for attracting new capital and expanding the market base. It is crucial to continue regulatory development, enhance transparency, and adapt to global changes to ensure sustainable growth in the coming years.