The Saudi capital market was affected by the COVID-19 pandemic on three levels, including the impact on companies’ profitability and performance, the market performance and liquidity, Mohammed El-Kuwaiz, Chairman of the Capital Market Authority (CMA) said.

Corporate profitability fell 50 percent year-on-year in the first nine months of the year, except for certain sectors, namely telecommunications, food, healthcare and retail.

Accordingly, more violations were observed leading the market regulator to strengthen its control over violators.

The higher market liquidity was spurred by foreign inflows, which stood at nearly SAR 115 billion ($30.66 billion) for the period from early 2019 until the end of Q3 2020. This liquidity had a clear impact on the market dynamics.

Meanwhile, lower local and global interest rates made stocks more attractive, El-Kuwaiz pointed out, adding that the ongoing and remote market operations amid the strict COVID-19 measures created a further channel for retail investor activity, especially as other investment options were hit by the pandemic.

The COVID-19 crisis led to mixed forecasts about the pace of recovery. These forecasts gave room for speculations more than any other time.

These reasons together have started to affect the market either through higher liquidity, fluctuations or better retail investments.

“This matter raises no concerns in general, but the only exception was the liquidity found in some speculative companies and sectors, when compared to their current profitability and outlook especially as this liquidity is injected intentionally,” he added.

Several suspected cases are monitored and will be referred to the competent authorities, El-Kuwaiz concluded.

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