Saudi Arabia, the largest economy in the Middle East, has witnessed a 30% increase in the number of initial public offerings (IPOs) in the pipeline across the Saudi Exchange’s Main market and the Nomu-Parallel market, compared to the same time last year, according to Mohammed ElKuwaiz, Chairman of the Capital Market Authority (CMA). The kingdom, which is undergoing a major economic transformation under its Vision 2030, has attracted significant investments and interest from local and international investors, as well as diversified its capital market products and services.
The Saudi Exchange, formerly known as the Tadawul, is the largest and most liquid stock market in the region, with a market capitalization of over $2.5 trillion, and a trading volume of over $1.2 trillion in 2023. The exchange, which is regulated by the CMA, offers a variety of products and services to its market participants, such as equities, bonds, sukuk, exchange-traded funds (ETFs), real estate investment trusts (REITs), derivatives, and mutual funds.
The Saudi Exchange has also been undergoing a series of reforms and enhancements to improve its efficiency, transparency, and accessibility, as well as to align with the international standards and best practices. Some of the achievements and milestones of the Saudi Exchange include:
- The inclusion in the MSCI Emerging Markets Index, the FTSE Russell Emerging Markets Index, and the S&P Dow Jones Emerging Markets Index, which has increased the inflow of foreign capital and the participation of institutional investors in the market.
- The launch of the Derivatives Market, which offers index futures and index options contracts, as well as single stock options contracts, which enable investors to hedge and manage portfolio risks effectively, as well as to diversify their investment strategies and opportunities.
- The launch of the Nomu-Parallel Market, which is an alternative equity market that caters to the needs of small and medium enterprises (SMEs), and provides them with easier and faster access to capital and liquidity.
- The launch of the Securities Clearing Center Company (Muqassa), which is the first independent clearing house in the region, and provides central counterparty services for all trades executed on the Saudi Exchange.
IPOs: A key indicator of economic growth and diversification
IPOs, or initial public offerings, are the process of offering shares of a private company to the public for the first time, and listing them on a stock exchange. IPOs are a key indicator of the level of economic growth and diversification of a country, as they reflect the confidence and appetite of the investors, as well as the innovation and potential of the companies.
Saudi Arabia has been witnessing a surge in the number and value of IPOs in recent years, as the kingdom has been implementing various initiatives and incentives to encourage and facilitate the listing of companies on the Saudi Exchange, as part of its Vision 2030, which aims to diversify the economy, boost the private sector, and enhance the financial sector. According to ElKuwaiz, the number of IPOs in the pipeline across the Saudi Exchange’s Main market and the Nomu-Parallel market has increased by 30% year-on-year (YoY) to 56, compared to the previous year.
Some of the factors that have contributed to the growth of IPOs in Saudi Arabia include:
- The support and guidance of the CMA, which has launched several programs and regulations to simplify and streamline the IPO process, such as the Fast Track program, the Book Building process, the eIPO platform, and the Corporate Governance Regulations.
- The demand and diversification of the investors, both local and international, who are looking for more opportunities and returns in the Saudi market, and who have shown interest and enthusiasm in various sectors and industries, such as information and communications technology (ICT), healthcare, education, and entertainment.
- The innovation and ambition of the companies, both large and small, who have demonstrated their growth and performance in the market, and who have sought to raise capital and expand their businesses, as well as to enhance their reputation and visibility.
Some of the notable IPOs that have taken place or are expected to take place in the Saudi market include:
- The Saudi Aramco IPO, which was the largest IPO in history, and raised $29.4 billion in 2019, and valued the state-owned oil giant at $1.7 trillion.
- The Dr. Sulaiman Al Habib Medical Services Group IPO, which was the largest healthcare IPO in the region, and raised $699.6 million in 2020, and valued the leading healthcare provider at $2.3 billion.
- The BinDawood Holding IPO, which was the largest retail IPO in the region, and raised $585.1 million in 2020, and valued the leading supermarket and hypermarket operator at $2.4 billion.
- The ACWA Power IPO, which is expected to be one of the largest IPOs in the region, and aims to raise $1 billion in 2024, and value the leading renewable energy developer and operator at $10 billion.
SCMF 2024: A platform for showcasing the Saudi capital market
The SCMF 2024, which was held between 19 and 20 February in Riyadh, under the patronage of Mohammed Al Jadaan, the Minister of Finance and Chairman of the Financial Sector Development Program, was the largest oil and gas event in North Africa and the Mediterranean region. The forum, which had the theme of “Powering Growth”, featured more than 54 speakers and 69 sponsors, and attracted more than 3,000 attendees from various sectors and industries.
The forum aimed to showcase the latest developments and opportunities in the Saudi capital market, which has been witnessing a remarkable recovery and growth in recent years, thanks to the reforms and incentives implemented by the Saudi government and the CMA. The forum also facilitated the networking and collaboration among the stakeholders and the experts in the capital market, and highlighted the achievements and discoveries in the oil and gas sector.
Some of the key announcements and outcomes of the SCMF 2024 include:
- The launch of Single Stock Options (SSOs) contracts on the Saudi National Bank (SNB), which is the first time that the bank’s shares will be traded as a derivatives product in the Saudi Exchange.
- The announcement of three new members in the Derivatives Market, namely Al Rahji Capital, Al Khabeer Capital, and Al Jazira Capital, which will commence brokerage services later this year.
- The revelation that the gross domestic product (GDP) of Saudi Arabia has surged to more than SAR 4 trillion from SAR 2.60 trillion in nominal terms, and that the non-oil GDP has grown by 4.9% in 2023.
