Saudi Trading: Comprehensive Guide to the Financial Market

Saudi Trading is the abbreviated name for the Saudi financial market, the official and sole stock exchange in the Kingdom of Saudi Arabia, managed by the Saudi Stock Exchange Company (Tadawul) under the supervision of the Capital Market Authority. Tadawul was established in its current organized form in 2003 as a strategic step to enhance transparency and regulate trading mechanisms at the national level. Tadawul is headquartered in Riyadh, and all its activities are subject to strict regulatory oversight aimed at protecting investors and ensuring market integrity.

Saudi Trading plays a pivotal role in financing the Saudi economy, serving as a primary platform for trading stocks, bonds, sukuk, and exchange-traded funds, providing a transparent pricing mechanism for securities. It enables investors of all categories—individuals and institutions, local and foreign—to buy and sell shares in listed Saudi companies.

The market has contributed to driving economic development by supporting local companies in raising capital and providing opportunities for investors to participate in the growth of major Saudi companies. Saudi Trading has also facilitated the listing of new companies in the main market and the growth market (parallel market), enhancing the diversity of investment options and increasing market depth.

Saudi Trading is overseen by the Saudi Capital Market Authority, which is the regulatory authority for financial markets in the Kingdom. The Authority establishes regulations and rules that ensure transparency, integrity, investor protection, and prevent manipulation or exploitation within the market.

The Saudi Stock Exchange Company (Tadawul) is the executive body that manages the daily operations of the market, including company listings, monitoring trades, settling transactions, and publishing official data. Both parties cooperate to ensure that operations run efficiently, applying international standards in trading and disclosure.

The Authority has focused on developing the digital infrastructure of the market, adopting a complete electronic trading system, implementing a T+2 settlement mechanism (delivery of securities and payment two business days after the transaction is executed), and activating investor protection systems through real-time monitoring of trades. Additionally, financial disclosure and corporate governance requirements have been enhanced, which has increased the confidence of local and global investors in the market.

In the first quarter of 2025, Saudi Trading witnessed a series of important developments and statistics that reflect the state and trends of the market.

The general market index (TASI) closed at 12,025.05 points at the end of the first quarter of 2025, recording a slight decline of 3.04% compared to the same period in 2024. The highest point reached by the index during the quarter was 12,471.72 points on February 10, 2025.

In terms of market capitalization, the capitalization of listed companies reached approximately 9,918.69 billion Saudi Riyals (approximately 2,644.98 billion USD), representing a decrease of about 9.32% from the first quarter of the previous year. The quarterly trading value amounted to 362.59 billion Riyals (about 96.69 billion USD), down 37.04% from the same period in 2024, with 28.33 million transactions executed and about 17.14 billion shares traded.

These figures reflect fluctuating activity in the early months of 2025, as the market experienced a decline in liquidity rates and a decrease in trading volumes compared to the previous year. Nevertheless, the general index maintained its relative stability, indicating the continued attractiveness of the market as an investment destination, with expectations of a return to momentum as local and global economic indicators improve.

The Saudi Trading market is divided into several key economic sectors that reflect the diversity of the national economy. Among the most prominent are:

1. Energy and Petrochemicals Sector: This sector includes major companies led by Saudi Aramco and petrochemical firms, representing over 40% of the total market capitalization. The performance of this sector is closely linked to oil prices and global energy demand.

2. Banking and Financial Services Sector: This sector includes banks such as Al-Rajhi, National Commercial Bank, Riyadh Bank, and others, accounting for about 10-15% of market capitalization. This sector supports market liquidity and benefits from interest rate movements.

3. Telecommunications Sector: This sector includes companies like STC, Mobily, and Zain, and is considered one of the sectors with stable growth and sustainable returns.

4. Basic Materials and Mining Sector: This sector includes SABIC (later merged into petrochemical minerals), Ma'aden, and cement companies. It contributes to diversifying the economy and reducing dependence on oil.

5. Retail and Consumer Goods Sector: This sector includes major companies such as Al-Othaim and Saco, playing a pivotal role in driving liquidity during seasons.

6. Real Estate and Construction Sector: This sector includes real estate development companies and construction firms, influenced by mortgage financing policies and interest rates.

Additionally, there are sectors such as healthcare, renewable energy, technology, transport, and entertainment, reflecting the inclusiveness and diversity of the Saudi market.

Saudi Trading consists of two main markets: the main market and the growth market.

The main market is dedicated to large, stable companies that meet strict listing requirements such as high capital, stable profit records, and a public offering ratio of no less than 35%. This market provides high liquidity and relative stability in performance, making it suitable for investors seeking safety and continuity.

On the other hand, the growth market (parallel market) is designed for small and medium-sized companies that may not meet all the requirements of the main market. It features lower listing requirements, allowing startups to raise funds and expand their businesses. Investing in the growth market is relatively high-risk, but it may offer rapid growth opportunities for investors with a risk appetite.

Investors can diversify their portfolios between the two markets to achieve a balance between safety and growth according to their investment goals and risk tolerance.

Investors rely on several key indicators to assess the performance of the Saudi stock market, the most important of which are:

- General Market Index (TASI): Reflects the performance of all companies listed in the main market and is the most important indicator for tracking overall market movements.
- Growth TASI Index: Specific to companies listed in the parallel growth market.
- Sector Indices: Such as the banking index, energy index, basic materials index, etc., which allow investors to analyze the performance of specific sectors.

Data for these indicators is published daily on the official Saudi Trading website, and additional analyses are available through licensed financial platforms such as Argaam and Bloomberg. Monitoring these indicators helps investors evaluate general trends and make informed decisions about their investment portfolios without providing any investment recommendations.

Saudi Trading operates on an advanced electronic trading system that allows for order execution and real-time market monitoring. The trading session is divided into three phases:

- Pre-opening phase (9:30 - 10:00 AM): Only order entry is allowed.
- Main trading session (10:00 AM - 3:30 PM): Buy and sell orders are executed during this time.
- Post-closing phase (until 4:00 PM): Limited to final settlement.

The T+2 settlement system is applied, meaning that securities transfer between the seller and buyer, and payment occurs two business days after the transaction is executed. This system allows for greater flexibility and reduces operational risks. Currently, there is no comprehensive margin trading or short selling system, which limits advanced speculative strategies and enhances market stability.

The Saudi Capital Market Authority is the main regulatory body that ensures market integrity and protects investors. The Authority implements a wide range of regulations:

- Requiring listed companies to disclose their financial results and any significant changes regularly.
- Monitoring trades to detect any manipulation or trading based on insider information.
- Enforcing corporate governance requirements to ensure transparency and board independence.
- Providing channels for receiving and investigating investor complaints.

Additionally, the Authority collaborates with Saudi Trading to develop advanced electronic monitoring systems that track the market in real-time and activate procedures to suspend suspicious stocks immediately. It has also launched awareness campaigns to raise investor awareness of their rights and obligations, thereby enhancing the confidence of local and international investors in the market.

In recent years, Saudi Trading has gradually opened up to foreign capital. Qualified foreign investors (QFI) have been allowed to own shares of listed companies without significant restrictions, leading to positive net investment flows in 2024-2025, especially after the market was included in MSCI and FTSE emerging market indices.

Saudi Trading has also launched new products to enhance market depth, such as:
- Futures contracts (TASI Futures), which allow for hedging and risk management.
- Exchange-traded funds (ETFs) that track market indices or specific sectors.
- Allowing individuals to trade certain government bonds, which has expanded the investor base in the debt market.

These developments have made the Saudi market more attractive to global financial institutions and increased the diversity of investment tools available to individual investors.

The energy and petrochemicals sector is the most influential in Saudi Trading due to the significant weight of Aramco and petrochemical companies. The stocks in this sector move closely with global oil prices, making the market sensitive to fluctuations in global markets.

The banking sector ranks second in terms of influence, supported by rising interest rates that have enhanced banks' profit margins during 2024-2025. However, rising interest rates may negatively impact demand for real estate and commercial financing, which reflects on the performance of the real estate and construction sectors.

The telecommunications sector has maintained its stability due to digital transformation and government support, while basic materials companies have shown varied performance depending on global commodity prices and local support policies.

Analysis shows that the overall market performance is affected by a combination of external and internal factors, the most important of which are oil prices, interest rates, economic policies, and investor confidence.

During 2024-2025, the Capital Market Authority and Saudi Trading worked on updating regulatory and technological frameworks to enhance market efficiency. Among the most important developments are:

- Implementing stricter governance requirements for listed companies and tightening regular financial disclosure standards.
- Introducing modern technologies such as digital signatures and updating electronic trading platforms, facilitating account opening and remote trade management.
- Studying the introduction of blockchain technology for settling certain financial contracts by 2025.
- Enhancing investor protection through awareness campaigns and providing electronic tools to monitor suspicious trades.

All these steps aim to raise the level of transparency, protect rights, and increase the market's attractiveness to both local and foreign investors.

The Growth Market or parallel market represents an essential part of the Kingdom's strategy to support the emerging business sector. The Growth Market is designed with simplified listing requirements compared to the main market, making it easier for small and medium-sized enterprises to raise funds through public offerings.

By the end of 2024, the number of companies listed in the Growth Market exceeded 30, most of which operate in technology, renewable energy, health, and services. This market provides opportunities for investors wishing to participate in the early stages of company growth, albeit at the cost of taking on higher levels of risk.

Regulatory authorities aim to increase the number of listed companies to around 500 by 2030, indicating a long-term trend to make the parallel market a key platform for supporting innovation and economic growth.

At the national level, there are no competing exchanges to Saudi Trading, as it is the exclusive market for trading local stocks, funds, and bonds.

Regionally, Saudi Trading outperforms markets such as Abu Dhabi, Dubai, Qatar, and Egypt in terms of market capitalization and number of listed companies, thanks to the strength of the Saudi economy, abundant local capital, and the presence of giant companies like Aramco.

Internationally, Saudi Trading faces competition in attracting capital from global markets and competing emerging markets. The market's inclusion in MSCI and FTSE indices has enhanced its appeal to global investors, yet it remains linked to global capital flows and the movements of international financial markets.

Any qualified investor (Saudi, Gulf, or qualified foreign) can open a trading account in the Saudi market through a licensed broker from the Capital Market Authority. Electronic platforms are available for most brokers, allowing the submission of required documents (ID, proof of residence, etc.) and completing the account opening process within one to three business days.

Foreign investors often need to register within the qualified foreign investor (QFI) framework through a local broker, following identity and eligibility verification procedures. After opening the account, investors can monitor market data, orders, and transactions through electronic trading platforms or mobile applications.

All financial data, company news, and quarterly reports are available on the official Saudi Trading website and sites like Argaam and Bloomberg, ensuring transparency and easy access to essential information for making informed decisions.

In the first quarter of 2025, the financial indicators for the Saudi market showed the following:

- General Market Index (TASI): 12,025.05 points.
- Total market capitalization: 9,918.69 billion Saudi Riyals (2,644.98 billion USD).
- Quarterly trading value: 362.59 billion Riyals (96.69 billion USD).
- Volume of traded shares: 17.14 billion shares.
- Number of executed transactions: 28.33 million transactions.
- Annual change in the index: -3.04% compared to the first quarter of 2024.
- Average price-to-earnings (P/E) ratio: approximately 15 for leading stocks, varying by sector.
- Average annual dividend yield: between 3% and 7%, led by banks and energy.

These indicators reflect the strength and diversity of the market, but they also show a relative decline in liquidity and trading activity during the beginning of 2025 compared to the previous period, as investors await new economic and quarterly developments.