Interview: Faris AlGhannam
Where do you identify opportunities to enhance and expedite the listing process?
FARIS ALGHANNAM: The country’s economic performance in 2022 validated and reflected significant progress in the implementation of the Vision 2030 development plan. The reforms and programmes associated with the blueprint contributed to the strong interest seen in primary markets in the Kingdom that year, particularly in terms of initial public offerings (IPOs). A good example of this is the level of participation of international investors in domestic IPOs, which has expanded significantly. Historically, we have seen international participation at levels of around 10-15% but in 2022 it rose to 25-30%.
In recent years, sector regulators and other key stakeholders have successfully addressed many of the delays that used to hamper the listing process. At present, a few related efforts remain works in progress, including the settlement process and the lead time from the close on an offering to its trading debut – both of which we expect to be addressed in the coming years. These will enhance the IPO and listing process in the Kingdom.
In addition, the Kingdom has progressed in the development of domestic equity capital markets by allowing and facilitating dual and cross-listing with other exchanges in the region, with the potential for further expansion. This initiative presents an opportunity for regional and global firms to list in the Kingdom, as well as for Saudi companies to access liquidity and investors in other markets, thus offering local investors access to global opportunities.
Such qualitative initiatives are expected to, upon full and successful implementation, act as a stepping stone in the journey towards transforming domestic capital markets into a model for the region and potentially a destination that not only allows companies to access funds, but also enables mangers and other financial institutions to attract investment.
What role do international financial entities play in raising awareness of investment opportunities, and how can they facilitate access to funds?
ALGHANNAM: International financial institutions play an important role in creating awareness about the Saudi market and the substantial opportunities that exist here, particularly among investors in the region and around the world. At the transactional or project level, international financial institutions can help in facilitating access to local, regional and global pools of funds for Saudi clients. For example, HSBC organises and hosts Saudi Arabia-focused conferences in relevant international facilities and invites investors from around the world. In this way, potential investors are able to engage with Saudi companies and projects in order to learn more about these businesses and the investment opportunities they represent, as well as the market dynamics in the sector and the country more broadly.
How can local small and medium-sized enterprises (SMEs) be encouraged to seek growth opportunities via capital markets?
ALGHANNAM: Local SMEs previously faced significant challenges regarding access to capital and financing. However, Vision 2030 explicitly acknowledges the importance of the role that SMEs play in the wider economy, particularly in relation to economic growth, the creation of job opportunities, and the facilitation of innovation and development.
Accordingly, many of the capital and financing challenges that domestic SMEs face have been addressed with the creation of several programmes and stakeholders that directly focus on supporting such small companies. Some of these include the Small and Medium Enterprise Authority, otherwise known as Monsha’at; the Small and Medium Enterprise Bank, which is affiliated with the National Development Fund; and the Nomu – Parallel Market.
Read More from OBG
