Saudi capital market strategy set to boost growth, transparency

The Capital Market Authority aims to double the number of fintech companies licensed by 2026, with a focus on open finance applications and regulatory support for startups. File
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Updated 13 January 2025
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Saudi capital market strategy set to boost growth, transparency

  • Capital Market Authority initiatives to transform capital market into a key pillar of the national economy

RIYADH: Saudi Arabia’s Capital Market Authority has unveiled its ambitious 2024-2026 strategic plan, which aims to further develop the Kingdom’s financial market and enhance its global competitiveness.

With more than 40 initiatives, the plan is set to transform the capital market into a key pillar of the national economy, in line with Vision 2030.

In an interview with Arab News, Constantin Cotzias, European director at Bloomberg LP, said that the plan’s alignment with Vision 2030 is crucial to drive Saudi Arabia’s economic diversification through robust financial integration and growth. 

“The strategy emphasizes capital market development as a key enabler of economic growth by expanding financing options, promoting investment opportunities, and attracting international capital,” said Cotzias. 

He added that the sukuk and debt markets will play a key role in financing large-scale infrastructure and sustainable investments, driving the Kingdom’s non-oil economy.

Strategic pillars

The CMA’s strategy is built around three main pillars: market growth, ecosystem enablement, and investor protection.

The first pillar focuses on enhancing the capital market’s position in financing and investment. This includes expanding the stock market’s role in capital raising, developing sukuk and debt instruments, and enabling the asset management industry to attract more international investment. 

“Competitive valuations and robust market liquidity are essential for attracting investors, making Saudi debt instruments more appealing than global alternatives,” Cotzias added. 

The strategy emphasizes capital market development as a key enabler of economic growth by expanding financing options, promoting investment opportunities, and attracting international capital.

Constantin Cotzias, European director at Bloomberg LP

A key component of this pillar is the CMA’s focus on increasing the size of the debt instruments market to 24.1 percent of gross domestic product by 2025. Cotzias explained that achieving this target will require regulatory reforms that enhance market accessibility for global investors and improve liquidity. 

Martin Rauchenwald, managing partner at Arthur D. Little, told Arab News that deepening the market and increasing foreign investor participation is essential for creating a more liquid and resilient market that can withstand global economic volatility. 

Furthermore, simplifying the regulatory framework for issuing and listing debt instruments will significantly speed up capital market activities. 

Rauchenwald compared this to international benchmarks, noting that markets like the US and EU have streamlined their processes to allow for higher volumes of bond activity, which is a goal Saudi Arabia is striving for.

The second pillar emphasizes enabling the capital market ecosystem, particularly through support for financial market institutions and fintech innovation. 

The CMA aims to double the number of fintech companies licensed by 2026, with a focus on open finance applications and regulatory support for startups. 

Mohammad Nikkar, principal at Arthur D. Little Middle East, highlighted the importance of the CMA’s Fintech Lab initiative, which provides a controlled environment for fintech companies to experiment and grow. 

“The CMA’s sandbox approach balances regulatory oversight with the flexibility needed to foster fintech startups and innovation,” Nikkar told Arab News. 

Deepening the market and increasing foreign investor participation is essential for creating a more liquid and resilient market that can withstand global economic volatility.

Martin Rauchenwald, managing partner at Arthur D. Little

The growth of fintech is expected to enhance competition and operational efficiency in the financial market. By promoting innovation and integrating advanced technologies, the CMA aims to streamline financial operations and improve access to services for both institutional and retail investors.

The third pillar focuses on protecting investors’ rights by improving transparency and supervisory mechanisms. 

Cotzias pointed out that enhancing compensation mechanisms and dispute resolution processes are vital for building investor confidence, particularly among retail investors. 

Drawing comparisons with the UK’s Financial Services Compensation Scheme, Cotzias noted that these measures reassure both local and international investors, ensuring that the market operates under a robust regulatory system.

Key initiatives

Among the 40 initiatives under the CMA’s strategy, the introduction of Special Purpose Acquisition Companies in the parallel market and the issuance of Saudi Depositary Receipts stand out. 

These steps are expected to diversify investment opportunities and attract both domestic and international investors. Rauchenwald emphasized the importance of SDRs in boosting cross-border investment, adding that this move is aligned with the CMA’s goal of integrating Saudi markets globally.

In addition to facilitating debt market growth, the CMA is committed to developing regulatory frameworks for green, social, and sustainable debt instruments. 

Cotzias emphasized that the lack of international standardization for sustainable finance products presents a challenge but added that the CMA’s efforts to align with global practices will attract more investment into green finance. 

“Saudi Arabia can draw inspiration from frameworks like the EU’s Green Bond Standard, which reduces greenwashing risks and improves comparability,” he said.

The CMA’s green sukuk initiative is a significant milestone for the Kingdom’s environmental, social, and governance goals. Nikkar pointed out that Saudi Arabia’s competitive edge lies in its ability to combine Islamic finance with global sustainability goals. 

“Green sukuk aligns with international best practices while leveraging Saudi Arabia’s leadership in Islamic finance,” he explained.

The CMA’s goal is to increase the stock market’s value to 80.8 percent of gross domestic product by 2025, up from 66.5 percent in 2019. This will be achieved by expanding investment opportunities, including sustainable and green sukuk, and by simplifying regulatory procedures to encourage more companies to list on the market.

Focus on fintech and innovation

The CMA’s strategy places significant emphasis on supporting financial technology innovation. 

As Nikkar noted, the regulatory flexibility provided by the Fintech Lab allows startups to experiment with new business models in a controlled environment without being subject to the full regulatory burden typically imposed on licensed capital market participants. 

This fosters a dynamic fintech sector while ensuring consumer protection.

By encouraging fintech growth, the CMA is enhancing the overall efficiency and competitiveness of the financial market. This initiative will not only benefit startups but also push traditional financial institutions to innovate and offer better services to meet the evolving needs of investors.

Rauchenwald added that the CMA’s focus on fintech innovation, combined with its risk-based supervision model, will reshape the competitive landscape for banks, brokers, and asset managers in Saudi Arabia. 

“Fintech growth will disrupt traditional players, prompting them to innovate and compete more aggressively,” he said.

Achievements and future targets

The CMA’s 2024-2026 plan builds on the successes of its previous 2021-2023 strategy, which saw a 52 percent increase in the number of listed companies — rising from 204 in 2019 to over 310 by the end of 2023. 

The value of managed assets also grew by 74 percent during this period, reaching SR871 billion ($231.9 billion).

Rauchenwald highlighted the significance of the new procedures for class action compensation, which allow groups of investors to file lawsuits collectively and seek compensation for misconduct. 

“This is a major step forward in promoting investor confidence and holding companies accountable,” he said, comparing it to global standards seen in the US and Europe.

Looking ahead, the CMA aims to continue growing the asset management industry by introducing more flexible regulatory frameworks for investment funds. 

Cotzias noted that easing regulatory barriers for foreign investors will be critical in boosting Saudi Arabia’s competitiveness, especially in sectors such as real estate, renewable energy, and technology.

International competitiveness

One of the key goals of the CMA’s 2024-2026 strategy is to enhance the Saudi financial market’s international appeal. 

By implementing regulatory reforms, improving transparency, and promoting ESG-aligned financial products, the CMA aims to position Saudi Arabia as a leading regional and global financial hub.

Nikkar emphasized that diversifying financial products, particularly in Islamic finance, will help Saudi Arabia stand out against regional competitors like Dubai and Qatar. 

“The Kingdom’s leadership in Islamic finance, combined with its commitment to sustainability, gives it a competitive edge in attracting both regional and international investors,” he said.

In terms of attracting foreign investors, Cotzias pointed out that the CMA’s review of foreign investor restrictions, including simplified registration and increased ownership limits, will enhance Saudi capital markets’ appeal to global investors.

Investor protection and governance

Central to the CMA’s strategy is the protection of investors’ rights. The authority plans to strengthen corporate governance practices across listed companies and investment funds. 

According to Cotzias, these governance reforms are expected to raise the accountability of board members, improving investor trust in Saudi financial institutions.

The CMA’s focus on improving transparency and supervisory mechanisms will also enhance investor protection. By simplifying procedures for compensation and complaints resolution, the CMA aims to create a more transparent and accountable market environment.


Chief economists expect global economic conditions to weaken in 2025

Updated 16 January 2025
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Chief economists expect global economic conditions to weaken in 2025

DUBAI: More than half of chief economists expect economic conditions to weaken in 2025, according to a World Economic Forum report released on Thursday.

“The growth outlook is at its weakest in decades and political developments both domestically and internationally highlight how contested economic policy has become,” said Aengus Collins, head of Economic Growth and Transformation at the WEF.

The outlook is more positive in the US, with 44 percent of chief economists predicting strong growth in 2025, up from 15 percent last year. However, 97 of respondents in the “Chief Economists Outlook” report said they expected public debt levels to rise, while 94 percent forecast higher inflation.

Europe, on the other hand, remains the weakest region for the third consecutive year, with 74 percent of economists expecting weak or very weak growth.

In the Middle East and North Africa region, 64 percent expect moderate growth while a quarter expect weak growth.

Collins said the global economy was under “considerable strain,” worsened by increasing pressure on integration between economies.

A total of 94 percent of economists predict further fragmentation of goods trade over the next three years, while 59 percent expect the same for services trade. More than 75 percent foresee higher barriers to labor mobility and almost two-thirds expect rising constraints on technology and data transfers.

The report suggests that political developments, supply chain challenges and security concerns are critical factors that will likely drive up costs for both businesses and consumers over the next three years.

Businesses are expected to respond by restructuring supply chains (91 percent), regionalizing operations (90 percent), focusing on core markets (79 percent) or exiting high-risk markets (76 percent).

When the economists were asked about the factors contributing to current levels of fragmentation, more than 90 percent pointed to geopolitical rivalries.

This is largely due to the “strategic rivalry” between the US and China, according to the report, along with other geopolitical disturbances, particularly in Ukraine and the Middle East.

Global fragmentation is likely to result in a more strained global landscape with chief economists expecting an increase in the risk of conflict (88 percent), a more bipolar system (79 percent) and a widening divide between the Global North and South (64 percent).

“In this environment, fostering a spirit of collaboration will require more commitment and creativity than ever,” Collins said.


Australian-Saudi Business Council hosts joint forum to help boost trade

Updated 16 January 2025
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Australian-Saudi Business Council hosts joint forum to help boost trade

  • Event brought together more than 35 participants from both nations to discuss key opportunities for trade and investment

RIYADH: The Australian-Saudi Business Council hosted a joint forum on Thursday to discuss the enhancement of collaboration and trade between the two countries.

Led by Daniel Jamsheedi, the council’s country director, the event brought together more than 35 participants from both nations to discuss key opportunities for trade and investment.

The event, a collaboration with the Federation of Saudi Chambers, aimed to build on the success of the first Australian Pavilion at the Future Minerals Forum in Riyadh this week, and further strengthen the economic partnership between the two countries, organizers said.

Sam Jamsheedi, the president of the council, thanked the federation for the vital role it played in the success of the forum.

“The Federation of Saudi Chambers is one of our key stakeholders and our partner within the Kingdom,” he said.

“As a business council, we appreciate the efforts put in to enable this joint business forum to succeed.”


Closing Bell: Saudi main index rises to close at 12,256 

Updated 16 January 2025
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Closing Bell: Saudi main index rises to close at 12,256 

RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Thursday, gaining 43.82 points, or 0.36 percent, to close at 12,256.06. 

The total trading turnover of the benchmark index was SR6.14 billion ($1.63 billion), with 104 stocks advancing and 129 retreating. 

Similarly, the Kingdom’s parallel market Nomu gained 198.90 points, or 0.64 percent, to close at 31,498.71, as 51 of the listed stocks advanced and 37 retreated. 

The MSCI Tadawul Index also rose, gaining 9.13 points, or 0.60 percent, to close at 1,535.78.

The best-performing stock of the day was Shatirah House Restaurant Co., which debuted on the main market. Its share price surged 5.31 percent to SR22.62. 

Other top performers included Fourth Milling Co., with its share price rising 4.49 percent to SR4.19, and Saudi Paper Manufacturing Co., whose share price surged 3.36 percent to SR67.70. 

Riyadh Cables Group Co. recorded the biggest drop, falling 2.88 percent to SR141.80. 

National Co. for Learning and Education also saw its stock price fall 2.73 percent to SR185.40. 

Buruj Cooperative Insurance Co. also saw a drop in its stock price, falling 2.63 percent to SR22.22. 

On the announcements front, the Arab National Bank has launched the offer of its SR-denominated additional tier 1 capital sukuk under its sukuk program.  

According to a Tadawul statement, the amount, terms, and return on the sukuk will be determined later based on market conditions. The minimum subscription and par value are set at SR1 million. 

The targeted investors are institutional and qualified clients in line with the Capital Market Authority’s regulations. HSBC Saudi Arabia and ANB Capital Co. are joint lead managers for the sukuk issuance. 

Arab National Bank ended the session at SR21.10, with no change in price. 

Tam Development Co. received a purchase order for a project worth SR29.45 million as part of a framework agreement with a government agency announced in March, with a total value of SR200 million. 

Tam Development Co. ended the session at SR200, up 3.45 percent. 

Saudi Real Estate Co. secured Shariah-compliant banking facilities from Bank Al-Jazira worth SR700 million. The facilities will finance ongoing and new projects, as well as expansion investments. 

Part of the financing, up to SR100 million, will support working capital requirements. The loans have a one-year short-term tenure and a maximum of ten years for long-term loans, with promissory notes and real estate mortgages as guarantees. 

Saudi Real Estate Co. ended the session at SR27.30, down 2.01 percent. 


Saudi Ma’aden awards $921m contracts for its 3rd phosphate fertilizer plant

Updated 16 January 2025
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Saudi Ma’aden awards $921m contracts for its 3rd phosphate fertilizer plant

  • Project designed to add 3 million metric tonnes annually to Kingdom’s phosphate production capacity
  • Contracts align with Saudi Arabia’s broader strategy to diversify its economy and expand its industrial base

JEDDAH: Saudi Arabian Mining Co. has awarded three contracts worth SR3.45 billion ($921.58 million) for its third phosphate fertilizer plant, reinforcing the Kingdom’s position in the global market.

In a filing with the Tadawul stock exchange, the national mining firm, also known as Ma’aden, named the contractors as China National Chemical Engineering Co., Sinopec Nanjing Engineering and Construction, and Turkiye-based Tekfen Construction and Installation Co.

First announced in 2016, the project is designed to add 3 million metric tonnes annually to Saudi Arabia’s phosphate production capacity. Estimated to cost SR24 billion, the facility is being developed in phases and was initially projected to reach full capacity by 2024, the company said at that time.

The contracts align with Saudi Arabia’s broader strategy to diversify its economy and expand its industrial base. As part of Vision 2030, the Kingdom is capitalizing on its vast reserves of phosphate, gold, copper, and bauxite to reduce its reliance on oil.

Valued at approximately $2.5 trillion, the Saudi mining sector is regarded as the fastest-growing globally and is positioned as the third pillar of its industrial economy.

The three contracts awarded include an SR1.22 billion agreement for general construction at Ras Al-Khair with China National Chemical Engineering. A second contract, worth SR1.36 billion, was awarded to Sinopec’s subsidiary for construction at Wa’ad Al-Shamal. Tekfen Construction secured the third contract at SR877 million, with work at Wa’ad Al-Shamal included.

The development aligns with Ma’aden’s 2016 announcement of a feasibility study for a world-class phosphate fertilizer production complex in Wa’ad Al-Shamal Minerals Industrial City, situated in Saudi Arabia’s Northern Province.

Ma’aden announced significant discoveries of gold and copper in the Arabian Shield region during the Future Minerals Forum 2025 in Riyadh, further advancing its mining ambitions.

The discoveries include extensive gold deposits at Wadi Al-Jaww and copper reserves at Jabal Shayban. Mineralization at these sites extends from shallow depths of 20 meters to depths of up to 200 meters, highlighting their potential for large-scale extraction, the company added.

Ma’aden also unveiled promising developments at its Mansourah-Massarah gold mine, where drilling has revealed high-grade gold mineralization beyond the current pit design. 

The financial impact of these discoveries is yet to be determined, Ma’aden said in a statement to the stock exchange.


MENA economic growth to accelerate to 2.9% in 2025, says Moody’s

Updated 16 January 2025
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MENA economic growth to accelerate to 2.9% in 2025, says Moody’s

RIYADH: Oil production and large investment projects will accelerate annual economic growth across the Middle East and North Africa by 0.8 percentage points in 2025, according to Moody’s.

The global credit rating agency forecasts growth of 2.9 percent this year, up from 2.1 percent in 2024, and also  maintained a stable outlook for the credit fundamentals of sovereigns in the region over the next 12 months.

The agency emphasized that the impact of large investments will be most evident in Saudi Arabia, driven by high government and sovereign wealth fund spending linked to the Vision 2030 diversification program.

The projections align with those of global consultancy Oxford Economics, which expects regional gross domestic product to grow by 3.6 percent in 2025, outpacing the firm’s global forecast of 2.8 percent. 

Moody’s added that the pickup in the MENA economy will be driven primarily by “stronger growth in the region’s hydrocarbon exporters because of a partial unwinding of strategic oil production cuts under the OPEC+ agreement.”

Alexander Perjessy, vice president and senior credit officer at Moody’s, said: “Large-scale investment projects, many of them part of longer-term government development and diversification agendas, will support non-hydrocarbon economic activity across the region.”

According to the credit rating agency, real gross domestic product growth for hydrocarbon-exporting nations is expected to rise to 3.5 percent in 2025, up from 1.9 percent in the previous year, as Saudi Arabia, the UAE, Iraq, Kuwait, and Oman ease the oil production cuts implemented in 2023.

In Qatar, growth in the small, gas-rich nation will be bolstered by the development of the petrochemical industry and construction activities related to the expansion of liquefied natural gas production capacity, set to come online between 2026 and 2030.

In Kuwait, non-hydrocarbon growth will be mainly driven by major projects, including the construction of a new port and a new airport terminal.

Meanwhile, Iraq’s non-hydrocarbon growth is expected to remain above pre-COVID levels, provided that improved domestic security conditions are sustained, driven by the gradual implementation of several transport and energy projects.

In the UAE, non-hydrocarbon growth will moderate slightly due to the completion of some infrastructure projects; however, it will remain robust, at around 5 percent in 2025.