The Saudi stock market is heading to achieve its highest annual closing level in 18 years, after its main index, the TASI (Tadawul All Share Index), has risen by approximately 13.5 percent since the beginning of 2023 until the end of the year.
The market erased last year’s losses of 7.1 percent, and is heading to close at a level exceeding 11,800 points, which is the highest since 2005 when the index reached 16,713 points. The market closed trading this year on Sunday.
The liquidity that flowed into the market supported it with the continued activity of offerings, in addition to approving a set of amendments and regulatory measures to raise the efficiency of the Kingdom’s stock exchange and attract investment.
Among the most prominent amendments that were implemented this year were the implementation of the new Companies Law and its executive regulations effective from the beginning of 2023, the adoption of the rules regulating foreign investment in securities, the adoption of amended financial adequacy rules, the amendment of the executive regulations of the Companies Law for listed companies, and allowing foreigners to invest in real estate sector in Makkah and Madinah. The Capital Market Authority canceled its share of the commission for trading sukuk and bonds, and announced the start of receiving applications for the “Alternative Trading Law.”
The regulatory amendments are in addition to other measures to increase market efficiency, including the launch of four new indices, which are an index for large companies, an index for medium-sized companies, an index for small companies, and an index for initial offerings.
“The markets believe that the growth rate in Saudi Arabia for the next two years will be better than the current one, which will be reflected in the performance of companies and thus in the financial market,” according to financial analyst Mohamed Zidan. “The performance of oil during this year did not affect the index,” he said while citing the rate of fluctuations in the oil giant Saudi Aramco’s stock, which was one-third less than the fluctuations in oil prices.
The decline in interest rates quoted by global markets also affects investors in the Saudi market. “The market is also pricing in a significant cut in the interbank interest rate (SIBOR) next year,” Zidane added.
IPO activity in Saudi Arabia did not slow down this year at the pace that affected most of the world’s markets, despite the headwinds that enveloped the financial markets and raised many concerns in global markets that witnessed a significant decline in the volume of IPOs.
The total initial offerings of companies in the Saudi market this year amounted to about SR12 billion ($3.2 billion), which is approximately less than a third of the value of offerings in the market during the past year, and it is also considered the lowest since the year that witnessed the outbreak of coronavirus pandemic, during which the value of offerings reached SR5.3 billion.
Thamer Al-Saeed, head of Asset Management at Rassanah Capital, noted that the number of IPOs during 2023 was normal, and the quality of the offerings was the most important, whether in terms of weight, value or sectoral diversification, as the market witnessed the entry of a new sector. The flow of liquidity from foreign investors witnessed the highest levels, and the appetite for IPOs will continue next year, according to Al-Saeed.
Mazen Al-Sudairi, head of research at Al-Rajhi Capital, agrees with previous expectations, and said that Tadawul Group said in its quarterly business results that the number of applicants for IPOs is increasing, and this is supported by the size of the current valuations, profit growth expectations, and recent successful IPOs, which is what it stimulates the continuation of the pace of proposals.
He considered that the effects related to geopolitical tensions remain for a limited period, and historically their period of impact does not exceed days, and the same applies to the fluctuation of oil prices. Despite the proposals that introduced companies into new sectors in the market, Al-Sudairi believes that modern sectors such as financial technology, renewable energy, and logistical services are among the sectors that the Saudi market needs.