The pragmatic approach adopted by the regulator, the Capital Market Authority, is showing signs of positive results. One of them is that Saudi Arabia is well poised to witness a spurt in IPO activity.

This is in spite of the fact that the Kingdom recorded the highest IPO activity among the GCC countries in 2013, with the listing of five companies worth SR1.90 billion.

We are in the third month of 2014 and the IPO activity has not yet gained any significant momentum, but the recent announcement of the Ministry of Finance about an IPO by Saudi Arabia’s largest lender, National Commercial Bank, is likely to change the dimension of the IPO market.

The Saudi stock investors showed some confidence after the NCB’s share offering plan as there is a big surge in the value of traded shares from SR5 billion in average to over SR11 billion now.

The abundant liquidity will keep the market value of trading very high and retain the market very active after the new listings.

The share offering by various companies will as well expand the base of shareholders at grassroots level and add new beneficiaries to the country’s wealth.

It is good to have a diverse stock markets whose dynamics are not linked to a single main sector.

Since the stock market momentum shows no signs of abating, the IPO market looks very attractive in Saudi Arabia. The stock market’s graph is in an upward trajectory after over 25 percent increase in the Tadawul All-Share Index in 2013.

The stock market sentiment has improved substantially now and the market is more stable after its collapse in 2008, which eroded bulk of investments and tarnished dreams of Saudi investors. Now the investors are more cautious in their investment strategies, which will certainly boost the market in the long run.

Tadawul has become an important engine of economic diversification by providing an important source of capital. It can help companies grow and develop longer-term strategies.

Nevertheless, the CMA has to change its approach of facilitating stock listings to consolidate the investor confidence. The IPOs are not only good news for local investors, but they also help attract regional and international attention, more so when the Kingdom is preparing to open its market to foreign direct investments.

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