SAUDI STOCK EXCHANGE

IPO FLURRY SPARKS HOPE FOR SAUDI CAPITAL MARKETS

The Saudi Stock Exchange (Tadawul) ended a six-year positive streak by declining 7.1% in 2022. However, the market made huge strides in other areas, and even the losses were more subdued than its peers in the emerging and developed markets.

The All Share Tadawul Index’s market capitalisation at the end of 2022 reached SAR 9,878.10 billion (USD 2,634.16 billion), decreasing by 1.31% compared to the end of the previous year, according to the Capital Market Authority’s (CMA) report for 2022.

Crucially, Saudi Arabia’s bourse led the region on listings, which bodes well for the depth and expansion of the market. The main Tadawul market saw 18 new companies, taking the total to 223. Americana was Saudi Arabia's largest IPO this year and the first simultaneous dual listing on the ADX and the Saudi Stock Exchange by floating 2.5 billion shares, or 30% of its share capital.

At the end of 2022, the market capitalisation of all IPOs reached SAR 147.37 billion, representing 1.49% of the total market capitalisation, according to the CMA.

Five IPOs were raised in Saudi Arabia to the tune of USD 490 million during the third quarter of last year alone. Alamar Foods Company’s public offering was the largest with USD 326 million raised and the IPO order book being oversubscribed approximately 48 times. Naqi Water Company raised USD 110 million, with the order book being oversubscribed over 30 times. The remaining three IPOs were on the Nomu-Parallel Market, where Saudi Networkers Services Ltd, International Company for Human Resources and Naba Alsaha Medical Services Company raised approximately USD 54 million in total.

“The parallel market Nomu is set to witness more listings during 2023 whether through public subscription of shares or direct listings,” according to Mubasher, which tracks regional market activity. “By the end of 2022, the capital market value of Nomu-listed companies totalled about SAR 35.09 billion, an increase of 84.39% when compared to SAR 19.03 billion by the end of 2021.”

 

The Nomu market ended with a market capitalisation of nearly SAR 35.09 billion. The total value of shares traded last year reached SAR 13.48 billion. The total number of transactions executed during the year 2022 reached 676,91,000.

The momentum has continued into the new year. The CMA approved the initial public offerings (IPOs) of Al Watania for Industries Company and Jamjoom Pharmaceuticals Factory Company to trade on the Tadawul. With each set to list 30% of their shares, Al Watania for Industries and Jamjoom Pharmaceuticals intend to offer 24 million shares and 21 million shares, respectively.The CMA also approved the request of four companies to list their shares on Nomu.

In addition, six approvals were also granted late last year, suggesting a steady flow of new companies entering the market.

 

The expansion of the Tadawul and the junior market are part of CMA’s plan to raise the market’s economic contribution in line with Saudi Vision 2030 goals.

The CMA’s Strategic Plan 2021-23 consists of four key pillars. The first involves facilitating funding, which aims to strengthen the market and promote its role in raising capital. Secondly, encourage investment by supporting the growth of asset management and promoting institutional investment. Promoting confidence is the third pillar, which aims to reinforce the CMA’s regulatory structure, and fourth is building capacities to support the development of market participants.

“The strategic plan aims to achieve the objectives and initiatives of the second pillar, the Financial Sector Development Program (FSDP), by deepening the financial market, developing the sukuk and debt instruments markets, enhancing the role of funds in financing the national economy, supporting the growth of asset management industry and enhancing institutional investment. It will emphasise market attractiveness, diversify investment products, and encourage investment and facilitate it to investors,” according to the CMA.

Going forward, the CMA Vision 2030 programme aims to boost investment literacy among market participants investors, issuers or securities service providers.

“Investment literacy helps understand the role and responsibilities of both regulators and financial institutions. Also, the awareness and literacy of investors, as well as other segments of market participants, play a positive role in enhancing corporate governance in the capital market,” the CMA noted.