Capital markets in Europe, the US and Asia have experienced challenging times in the wake of the Covid-19 pandemic and Russia’s invasion of Ukraine. However, Saudi Arabia’s capital markets have experienced sustained growth, with high-value initial public offerings (IPOs), robust trading and the Saudi Exchange showing the largest market capitalisation and liquidity of any country across the GCC as of mid-2022. The shortand medium-term outlook appears promising, with a strong IPO pipeline, and confidence among foreign and domestic investors that 2023-24 will be an impressive period for the Saudi economy and capital markets.

Indeed, while Europe and the US face high inflation, rising interest rates and widespread recession fears, as of mid-2022 the Kingdom and its partners in the GCC saw strong performance in terms of fundamentals from GDP growth to a current account balance (see Economy chapter). This comes on the back of surging oil and gas revenue, and solid commitments by the government to use its proceeds from increased oil revenue to invest in the Kingdom’s future and reach the goals outlined in its programme of structural transformation, Vision 2030.

Vision 2030 has been a catalyst for large investment projects, enhancing the fortunes of a range of listed and unlisted companies. Looking to the future, opening up the capital markets to unlisted companies can be seen as both a challenge and a significant opportunity.


The Saudi Exchange is the sole entity in the Kingdom authorised to be a securities exchange. It is one of the largest exchanges in the world, and wholly owned by the Saudi Tadawul Group, an entity that was established in March 2021 when the Saudi Exchange was reorganised into a holding company. The Saudi Exchange, meanwhile, was established in 2007 and can trace its history to 1954 when Saudi Arabia’s first informal trading market came into operation.

Saudi Tadawul Group went public in December 2021, floating 30% of its shares. The remaining shares are owned by the country’s sovereign wealth fund, the Public Investment Fund (PIF). The holding company is also responsible for the Securities Depository Centre Company (Edaa), the Securities Clearing Centre Company (Muqassa) and an innovation arm, Wamid.

The exchange features two equity markets: the main market and Nomu – Parallel Market. The main market’s primary index is the Tadawul All Share Index (TASI). There is also the MSCI Tadawul 30 Index (MT30), composed of approximately 30 of the largest, most liquid securities on the main market, based on their free-float market capitalisation. The Parallel Market Capped Index (NomuC) consists of companies listed on the market.

The Saudi Exchange has a fixed income market, which includes a bond and sukuk (Islamic bond) market for corporate and sovereign issuances. It has several indices, such as the Tadawul Sukuk and Bonds Index (TSBI). Additionally, it also features an Exchange Traded Funds (ETF) market, with several listed ETFs with varying underlying including equities, fixed income, and commodities. Derivatives have been in development for some time, with two products, the MT30 Index Futures and, more recently, single stock futures (SSFs) which were available as of mid-2022.


The exchange operates under the regulation and supervision of the Capital Markets Authority (CMA), which was established in 2004 following the 2003 Capital Markets Law and is led by five commissioners appointed by royal decree. It is a member of the International Organisation of Securities Commissions and represents the Kingdom in international fora.

The CMA has the power to licence market participants, authorise the offering of securities to the public, suspend listings and impose penalties on persons deemed to be violating capital market regulations. Such regulations are periodically updated, with a considerable body of legislation in place to regulate aspects from mergers and acquisitions, to IPOs and private placements to parallel market offers. In October 2021 the CMA also published a guide to cybersecurity for market institutions. More recently, in March 2022 it announced that it would issue rewards to market whistleblowers in order to further tighten market regulation.

The Saudi Central Bank (SAMA) is also the overall regulator of the banking, insurance and finance sectors. Meanwhile, the Ministry of Commerce and the Ministry of Investment (MISA) also impact the capital markets, as both seek to grow the economy through policies and promotions to boost competition and investment. In addition, MISA – previously the Saudi Arabian General Investment Authority – has a key role for non-GCC individuals and companies wishing to invest in the Kingdom. Such entities must register with MISA unless they have met the criteria under the qualified foreign investor (QFI) model – the most popular route for non-GCC foreign participation in the market. To qualify as a QFI, entities must register through local custodians.

The CMA has relaxed QFI requirements since the inception of the QFI framework in 2015. Individual QFIs may not own more than 10% of a listed entity, although total QFI ownership may reach 49%. As of mid-2022 the majority of QFIs were government and government-related entities and financial sector players, including insurers and brokerages. Unless they are government-related, QFIs must also have a minimum of $500m in assets under management.

Plans & Programmes

Increased foreign participation has long been a goal of the Kingdom’s capital market development plans, with these most recently boosted by the 2017 launch of the Financial Sector Development Programme (FSDP), a key part of Vision 2030. The FSDP lists the formation of an advanced capital market as one of its primary objectives and has set a number of goals to help secure the exchange’s progress. One of these is to boost the market’s value as a percentage of GDP to 80.8% by 2025, even without Saudi Aramco, which held an IPO in 2019. Other goals initially were inclusion in the MSCI Emerging Markets Index, the FTSE Russell Emerging Markets Index and the S&P Dow Jones Emerging Markets Index – all of which have since been achieved.

In April 2022 Saudi Tadawul Group implemented a series of post-trade infrastructure enhancements aimed at turning the exchange into a global investment platform and increasing efficiency. According to the holding company, this would enable the introduction of new products and services, and enhance market processes. These improvements follow in the footsteps of FSDP, which seeks to establish the Saudi capital market as a global centre for Islamic and sustainable finance.


The Saudi Exchange has worked to include environmental, social and governance (ESG) criteria into its operations and oversight. In October 2021 the authorities issued ESG disclosure guidelines for listed companies and others seeking to be included on the exchange. Beyond the release of the guidelines, the exchange has implemented additional measures to drive ESG implementation. In February 2022 an ESG awareness-building webinar series was launched to broaden understanding among listed companies of the importance and benefits of ESG implementation from the perspective of a range of stakeholders, including local and foreign investors. There are concerns about the disruption ESG may have as markets adjust to the evolving criteria. “While there is increasing interest in ESG investment, this segment is still in its infancy and, as a result, a concentration of ESG assets might lead to disruptive changes in a portfolio’s value. Diversification and wise leverage control are still needed,” Vijay Valecha, chief investment officer of Century Financial, told OBG. Even so, the Saudi authorities are confident that adopting sustainability will place the country’s capital markets in an advantageous position in the future.

Market Statistics

As of September 2022 TASI comprised a total of 217 companies. These include participants in 21 industrial sectors, defined according to Global Industry Classification Standard. The top of these by volume traded in the first quarter of 2022 were materials including chemicals, construction materials and metals; banks; real estate management and development; energy; and insurance. As for MT30, as of June 2022 its top constituent in terms of sector weight was Saudi National Bank, accounting for 14.4% of the index, followed by Al Rajhi Bank (14%), government-owned petrochemicals manufacturer SABIC (12.9%), Saudi Aramco (9%) and national telecom provider stc (8.8%).

MT30 is the underlying instrument for the exchange’s first derivatives product, MT30 Index Futures. The development of the derivatives market is a key pillar of the FSDP, with this taking another significant step forward in mid-2022 when the Saudi Exchange announced that it would launch SSF contracts starting in July of that year. These were cleared by Muqassa and were the second derivatives product on the local market after the MT30 Index Futures was introduced in August 2020 (see analysis).

Nomu, meanwhile, was established in 2017 to provide an alternative platform to the main exchange with lighter listing requirements. Listing on the parallel market requires a minimum market capitalisation of SR10m ($2.7m) while listing on the main market involves a minimum of SR300m ($80m). Participants are subject to lighter disclosure requirements and other less restrictive conditions. As of June 2022 there were 31 companies listed on the Nomu – Parallel Market, divided among 11 industry groups and with a total market capitalisation of approximately SR34.6bn ($9.2bn).

The sukuk and bonds market has three indices: the Sukuk/Bonds Market Index, the Government Sukuk/ Bonds Index and the Corporate Sukuk/Bonds Index. The Government Sukuk/Bonds Index is the largest, with 76 listed government sukuk and bonds, comprising 67 fixed and nine floating offerings as of June 2022. Between 2016 and 2021 there was a succession of sovereign bond and sukuk issues, many oversubscribed, with public debt issuance rising nearly 50% in 2020, to SR163bn ($43.6bn), while non-government debt issuance rose over 250%, from SR9bn ($2.4bn) to SR31bn ($8.3bn).

Meanwhile, as of June 2022 the Saudi Exchange listed 17 real estate investment trusts (REITs), up from one in November 2016, when Riyadh REIT became the first listing in the Kingdom and the second in the Middle East. There are also seven ETFs, two closed-end funds (CEFs), and a wide range of mutual funds.

Foreign Interest

Foreign participation has grown since the government opened the exchange to foreign investors in 2015. It liberalised foreign investment rules in 2016, 2018 and 2019, leading the number of QFIs to rise from 453 at the start of 2019 to more than 2900 as of June 2022. Since October 2019 foreign issuers have been allowed to list on the Saudi market. Further reform in February 2021 saw a requirement for foreign entities to have a regional headquarters in Saudi Arabia if they wish to be considered for government work and contracts – a move aimed at encouraging local basing of multinational investment firms.


The Covid-19 pandemic adversely impacted markets around the world, and Saudi Arabia was no exception. Yet overall, 2020 saw a 3.6% gain for TASI, while total market capitalisation rose slightly, by 0.9%, to SR9.1trn ($2.4trn). All sectors experienced gains that year except for energy (-1%); real estate management and development (-3.6%); banks (-6.4%); and commercial and professional services (-14.9%). This reflected the stronger impact of the pandemic on industries with operating models based on physical interactions with both co-workers and customers, and the global downturn in energy prices. At the same time, the sectors that saw growth during this period included pharmaceuticals, biotech and life sciences (43.9%); consumer durables and apparel (63.2%); and software and services (185.6%) – all sectors that demonstrated considerably high value throughout the pandemic.

There were three IPOs on main market in 2020, while three companies transferred to the main market from Nomu: Arab Sea Information Systems, Al-Omran Industrial & Trading Company; and Al-Samaani Factory for Metal Industries. The parallel market did well during the year as well, with capitalisation growing by nearly 380%, from SR2.5bn ($666.5m) in 2019 to SR12.2bn ($3.3bn).

The year 2020 also saw 72 sukuk and bonds issued, worth a combined SR387.8bn ($103.4bn). This was up around 12% on the 2019 total of 69 issuances, with a value of SR346.1bn ($92.3bn).

In 2021 the global economy, energy and commodity demand gradually revived. Indeed, an unprecedented surge in prices took place, compounded by global supply chain disruptions that continued into 2022. While a barrel of crude oil went for as little as $18.38 in April 2020, the price reached $54.77 in January 2021 and $86.51 in January 2022. The Kingdom’s GDP also increased, growing 3.2% in 2021, a trend that accelerated over the year to hit 6.7% in the fourth quarter.

TASI responded with growth, reflective of the performance of the wider economy. After closing 2020 at 8689.53 points, the index closed 2021 at 11,281.71 points, marking a gain of roughly 29.8%. Market capitalisation was up 9.9%, at SR10trn ($2.7trn), while the value of shares traded increased 7.1% to SR2.2trn ($586.5bn).

All sectors that experienced shrinkage in 2020 showed positive growth in 2021, with banking growing an impressive 61.1%, and those that had seen growth in 2020 continued to show expansion. Software and services, for example, grew by 103.3%. Other major growth sectors were media and entertainment, up 127.6%, and diversified financials, up 48.6%.

In 2021 the Kingdom launched nine IPOs valued at around SR117.6bn ($31.4bn). This brought the total of listed companies on TASI to 210 by close of year, after one company transferred from Nomu and three companies delisted. The two largest offerings were the $1.2bn listing of ACWA Power in October and the $1bn December offering of 30% of Saudi Tadawul Group itself, after around $122bn in orders had been received. Also at the end of 2021 the Saudi Exchange saw its first fully marketed accelerated offering in December 2021 for a value of $3.2bn, with the PIF selling a 6% stake of stc to local and foreign institutional investors.

Meanwhile, Nomu saw 11 new listings in 2021, including six IPOs, with transaction volume up 37% and trading values up 59.8%. Market capitalisation increased by 56.2% from SR12.2bn ($3.3bn) to SR19bn ($5.1bn) in 2021 as the number of listed companies reached 14. In December of that year local e-commerce firm Jahez had an IPO, the largest on the parallel market and the first for an e-commerce company in the Kingdom. As of January 2022 the firm’s market capitalisation was $2.4bn at listing. The bond and sukuk market also continued its upwards trend, with 79 issuances worth a combined SR461.4bn ($123bn) – an expansion of 19% from 2020. ETFs also showed expansion, with 2021 seeing the total value traded reach SR2.7bn ($719.8m), up from SR2.5bn ($666.5m) in 2020. The exchange’s sole CEF, Al Khabeer Income, realised SR1.9bn ($506.5m) in trades.

Continuing Growth

The economy and capital markets continued to grow in the first half of 2022, supported by Brent crude prices up over 50% since the start of the year. Indeed, while European, US and Asian main markets were in the red, by end-June 2022 TASI had recorded a moderate year-on-year increase.

Meanwhile, Vision 2030 reforms continue to drive a major diversification in the Kingdom’s economy that is reflected in solid fundamentals across industrial sectors. According to the Saudi Exchange’s 2021 “Annual Statistical Report,” higher trading volumes were demonstrated by materials, banks, and real estate management and development in the first quarter of 2022 – a pattern that was also evident the year before.

Behind much of this is a growing confidence in the Saudi economy among international and domestic investors. This has grown in parallel with concerns about traditional safe investment options, as these have become less stable in the face of rising consumer prices, interest rates and widespread warnings of recession.

IPO Pipeline

The Saudi market’s attractiveness looks set to increase with a pipeline of new IPOs in place on the back of a high-performing first half of 2022. Indeed, for the Middle East as a whole the first five months of the year were the best-ever recorded in terms of IPOs, with around $11.4bn in total raised. Bloomberg reported a wave of visits by US fund managers to the region to meet with companies looking to undertake IPOs. One example of this was Saudi luxury residential and commercial property developer Retal Urban Development Company, which attracted institutional orders worth $24bn for its $384m IPO in June 2022.

Other IPOs in the pipeline for 2022 include Al Borg Diagnostics, a private lab chain backed by Bahrain-based asset manager Investcorp, which is looking to raise around $350m from a share sale expected to take place in the second half of the year. Saudi Aramco Base Oils, or Luberef, is also set for an IPO in the second half of the year, with the potential to raise as much as $1bn from a 30% stake. According to Bloomberg, Luberef may be joined by other IPOs as Saudi Aramco looks at selling stakes in its retail fuels unit and trading business.

A further sign of the robust health of the market in the first half of 2022 was the announcement by stc that the company would increase its capital by SR30bn ($8bn) via the issue of 1.5 bonus shares for every existing share. The PIF may also be a source of future share sales after Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud announced in March 2021 that the sovereign wealth fund could not hold significant stakes in such enterprises indefinitely.


In March 2022 Mohammed El Kuwaiz, chairman of the CMA, stated that his authority was considering around 100 IPO applications on the main market and Nomu, suggesting the recent wave of public offerings is set to continue. Alongside the development of the derivatives, fixed income and funds spaces, Saudi capital markets are expected to broaden and deepen in the coming years. At the same time, after weathering uncertainty surrounding the pandemic, the Kingdom has become a relatively safe haven for investors. Uncertainties remain over the global economy, and recession fears and inflationary pressures will likely depress worldwide growth in 2022-23. Nonetheless, Saudi Arabia is well positioned to leverage its strength as an energy exporter and as the GCC’s largest economy to draw investment and ensure a robust capital market.