RIYADH: Large companies have shown clear superiority over small and medium firms in the Saudi stock market since the launch of various market component indices in Sept. 2023, with large-cap indices rising while the latter declined.
The large-cap companies index rose 4 percent, and the MSCI Tadawul 30 index increased by around 3.6 percent during the mentioned period, according to the financial analysis unit of Al-Eqtisadiah, based on data from Tadawul.
The medium-cap companies index fell by 8.5 percent, while the small-cap companies index dropped at a steeper pace of 12.6 percent since the indices were launched.
The rise in large companies mitigated the negative impact of small and medium-cap declines on the Tadawul All Share Index, resulting in a smaller decline of 1.4 percent during the same period.
How have large companies outperformed small and medium ones?
The outperformance of large firms over their small and medium counterparts since 2023 has been primarily driven by Alrajhi Bank, whose stock surged more than 40 percent, benefiting from record profits over the past two years and average annual growth rates exceeding 20 percent.
This was further supported by liquidity flowing into the stock, especially foreign funds, due to its significant weight in emerging market indices, in addition to Alrajhi’s classification as an Islamic bank, which gives it a competitive edge in the eyes of some compared to major commercial banks.
Alongside Alrajhi, Maaden, Saudi National Bank, and STC were among the stocks supporting the rise in the large-cap index.
Maaden recorded gains exceeding 80 percent during the period, supported by record profits over the past two years and strong growth rates exceeding 80 percent in 2024 and 150 percent in 2025, driven by higher prices and sales of the company’s products.
Its stock reacted positively to gold reaching record levels recently, in addition to announcements of discoveries, particularly in the gold sector. Meanwhile, SNB’s stock rose 20 percent, and STC’s stock increased 10 percent during the same period.
These gains in the large-cap index came despite Saudi Aramco’s stock falling more than 20 percent during the mentioned period, coinciding with the Kingdom’s oil production cuts as part of the OPEC+ alliance and lower prices, which impacted the company’s profits and performance-linked distributions.
The Iranian war favors large companies
The Iranian war has also worked in favor of large businesses over the past two weeks amid the conflict, with the Tadawul 50 index rising 2.3 percent, and both the large-cap companies index and the MSCI Tadawul 30 index increasing by 2 percent each, boosting the overall TASI.
On the other hand, small and medium-cap indices rose at a slower pace, with the former up 1.8 percent and the latter up 1.4 percent.
With large companies rising at a faster pace than small and medium ones, TASI gained 2.2 percent since the outbreak of war in the Middle East.
Unlike the period since the indices were launched, Saudi Aramco was the main driver of gains during the recent Iranian war, with its stock rising more than 8 percent amid higher oil prices and the availability of alternative routes for Saudi Arabia to export its oil to the world away from the Strait of Hormuz.
These include the East-West Pipeline, which has a capacity of 5 million barrels per day, temporarily expandable to 7 million barrels per day as occurred in 2019, in addition to the Suez-Mediterranean pipeline, which is 50 percent owned by Egypt, with the Kingdom holding a 15 percent stake.
Alongside Aramco, SABIC’s stock supported the rise in large-cap indices, gaining more than 5 percent as Saudi petrochemical companies benefited from higher production costs for other businesses due to rising gas prices, giving local firms a competitive advantage.
Launch of indices in September 2023
In Sept. 2023, Saudi Tadawul launched new indices, including one for large companies, a second for medium companies, and a third for small companies, to provide a complete picture of the market structure.
Large companies represent 70 percent of the total free-float market capitalization, while medium companies account for 20 percent, and small companies make up the remaining 10 percent.
These indices also provide benchmark measures for investors, enabling them to expand their investment strategies and capitalize on opportunities offered by the market.
