RIYADH: Saudi Arabia’s stock exchange has a robust pipeline of 50 initial public offerings, a sign of growing confidence in the Kingdom’s capital market, according to a top official. 

Lee Hodgkinson, group chief strategy officer at Saudi Tadawul Group, said the increasing number of private sector listings underscores the maturity of the country’s financial ecosystem. 

The assessment aligns with professional services firm EY, which expects Saudi Arabia to lead IPO activity in the Middle East and North Africa this year. 

“There are more than 50 prospective IPOs registered at the CMA (Capital Market Authority). That is a very healthy pipeline. I’m sure a pipeline that is envied by many of our exchange peers around the world,” Hodgkinson told Arab News on the sidelines of the Capital Markets Forum in Riyadh. 

“The conventional wisdom is almost all of that pipeline must be government-related companies. Actually no, it is the private entities that are coming to market, which I think is a sign of real maturity of the capital markets in the Kingdom,” he added. 

Capital market growth

Saudi Arabia’s capital market is on a steady growth trajectory, with strong momentum expected through 2030, Hodgkinson said. 

“The economic drive in the Kingdom, it’s really quite astonishing, particularly relevant to the rest of the world. So, it really is boom time, and it long might continue,” Hodgkinson noted. 

The executive highlighted the Kingdom’s debt market as a future area of success, driven by ongoing regulatory reforms. 

“If you look at CMA strategy, if you look at the financial services development plan and the whole ecosystem drive, I feel very confident that we’ll see a very powerful debt market really emerging in Saudi Arabia in the coming years,” he said. 

Tadawul Group is working toward establishing Saudi Arabia as a global financial hub bridging the East and the West. As part of this strategy, the exchange is expanding its investor base, particularly among qualified financial investors. 

“We’re looking to internationalize, institutionalize and electronify the business,” he said, adding that three years ago, around 8 to 9 percent of institutional electronic flow came from overseas, which he described as “not a particularly large number of QFIs.” 

Hodgkinson pointed out that today, that volume accounts for 25 percent of the market and noted that they now have over 4,000 QFIs. “The growth of international investors and eyeballs on the Saudi market has exploded,” he added. 

Commodities market expansion

Saudi Tadawul Group is also pushing into the commodities sector, particularly through its investment in the Gulf Mercantile Exchange, formerly the Dubai Mercantile Exchange. 

“The contracts at the moment are about Omani crude oil — it’s the third-largest physically delivered oil contract in the world, mainly attracting clients east of Suez, China and India. We would be driving growth in those products with our partners,” Hodgkinson said. 

Tadawul is also looking to expand into metals, mining, and agriculture — key industries in Saudi Arabia’s economic transformation under Vision 2030. 

“Real economy actors have a lot of risks — production risks, pricing risks, marketing risks. Commodity hedging to us can be very valuable,” Hodgkinson noted. 

He stressed the need for regional benchmarks in commodities pricing, particularly for metals and mining. 

“Saudi Arabia is becoming a very important player in the metals world. I think 20 percent of steel is being imported into Saudi Arabia for construction. And the issue for me is, why should those products be priced overseas?” 

“The South-South connectivity from markets like Brazil, China, and India with Saudi is growing. Why shouldn’t we have products that serve those markets rather than having to price everything in London or New York?” 

Strategic acquisitions

Tadawul Group has been expanding its regional footprint, including a 32.6 percent stake acquisition in GMEX and a 49 percent stake purchase in Direct Financial Network Co. through its subsidiary Tadawul Advanced Solutions Co. 

The GMEX deal makes Saudi Arabia the only G20 nation with a dedicated commodities exchange. “It was a very, very important strategic move for us,” Hodgkinson said. 

The DirectFN acquisition, meanwhile, enhances Tadawul’s technology capabilities and expands its fintech presence in Saudi Arabia and the broader Middle East and North Africa region. 

“It gives us a highly effective and cost-effective technology development center in Sri Lanka. It builds our presence in the Saudi market in the fintech arena. It starts to give us technology and client relationships in other countries in the MENA region,” he added.