CAPITAL MARKETS

SAUDI FINANCIAL MARKET SECURES TOP SPOTS IN IMD RANKING

Saudi Arabia’s financial market indicators continue to improve, according to the IMD World Competitiveness Yearbook for 2023.

Indicators related to the financial markets in the survey showed the kingdom in third position among the most competitive countries on the Group of Twenty (G20) nations’ level; the kingdom advanced seven ranks compared to its standing in 2022.

Saudi Arabia also ranked first in the corporate boards index among G20 nations and second in the capital markets index, stock market capitalisation index (as a percentage of gross domestic product), shareholders' rights index, and venture capital index. It came in third in the stock market index and fifth in the index evaluating the ability of stock markets to provide adequate financing to companies.

Further, Saudi Arabia ranked third globally in the stock market capitalisation index (as a percentage of GDP), advancing over other countries like Japan, India, Germany, the United Kingdom, China, and the USA. The kingdom was also ranked third in the venture capital index, surpassing India, the UK, Germany, Japan, and China.

As for the stock market index (% change on the index), the kingdom ranked fifth, advancing over India, the USA, Japan, China, Germany, and the UK.

Within its region, Saudi secured first place in nine of the 12 indices among Arab countries participating in the report, and ranked second in one index while third and fourth, respectively, in the remaining indices.

The Efforts show the Capital Market Authority’s (CMA's) continued policy measures to strengthen, broaden and modernise the kingdom’s capital market sector, which is by far the largest in the region.

Some key policies in recent years include the CMA Board’s approval of the Securities Exchanges and Depository Centers Regulations, Capital Market Institutions Regulations, and the Instructions for Shariah Governance in Capital Market Institutions. The CMA Board also reviewed the Implementing Regulations of the Companies Law for Listed Joint Stock Companies to promote the regulatory environment of the companies, facilitate the legal procedures and requirements to instigate the business environment, as well as support investment, achieve a balance between stakeholders, and provide an ecient and fair framework for corporate governance, in addition to participating in economic entities’ sustainability.

  

June saw the Saudi Tadawul rise 4%, taking its gains for the year to 9.4%. The Tadawul is among the best performing markets in the region. Software and services sector emerged as the top performer, boasting an impressive gain of 18%, followed by the diversified financials and insurance sector, which recorded a gain of 11.2% while consumer durables and apparel sector also fared well, with gains of 10.9%. Tadawul’s index is trading at 17.2 times.

Saudi Arabia also dominated initial public oering in the region, with six IPOs on the Tadawul (Nomu) parallel market reflecting proceeds of USD 0.7 billion and a Real Estate Investment Fund (REIT) raising USD 0.1 billion in the first quarter of the year, according to Ernst & Young.

“Total proceeds raised in Q1 2023 decreased by 14%, while the number of IPOs decreased by 33% compared with Q1 2022. Globally, in Q1 2023, 299 IPOs raised USD 21.5 billion, a 61% decrease in funds raised y-o-y,” the management consultancy noted in its report. “This follows the trend for 2023 in which IPO-bound companies and investors faced persistent macroeconomic and geopolitical uncertainties, worsened by stress in the global banking system. Despite the weaker global sentiment, the MENA region remains buoyant.

The kingdom aims to increase the pace of IPOs with plans for 24 listings by the end of 2023. It is part of CMA’s efforts to support the economy, develop new and promising sectors and provide a funding channel, the market regulator said in its 2022 financial report.

The CMA is also preparing the regulatory framework for direct listing on the main market (Tadawul All Share Index), and listing special purpose acquisition companies (SPAC). 

Egypt’s EGX30 is the region’s best performing market, up 21%, followed by the Dubai Financial Market General Index, which is up 13.7% for the year, and Tunisia, which is placed 10.5% higher by the end of the first half of the year.

At the other end of the spectrum, Abu Dhabi’s FTSE ADX General Index was the worst performing market in the first half of 2023, with loss of 6.5%, followed by Qatar QE 20 Index’s 5.7% contraction during the period.