JEDDAH, 28 March 2005 — The total value of stocks exchanged on Saudi bourse soared to a record SR1.77 trillion last year from SR65 billion in 2000 thanks to new initial public offerings (IPOs), says Dr. Abdul Aziz Al-Dakheel, chairman of the Consultancy Center for Finance and Investment (CCFI).
“Flotation of shares by some joint stock companies as well as the decision taken by others to raise their capital have played a big role in increasing the volume of money invested in the stock market,” Al-Dakheel said.
In a statement issued on the occasion of the first Saudi capital market forum in Riyadh on April 19-20, Al-Dakheel said the remarkable growth of the stock exchange also reflected the growing confidence of Saudi investors in the market, especially in the wake of the new Capital Market Law.
According to a report carried by Al-Riyadh Arabic daily, the number of investors in the Saudi bourse rose to 2.5 million after the recent flotation of Bank Albilad shares. The figure showed that most Saudis preferred to invest in the Kingdom rather than abroad.
“The value of shares exchanged in 2004 was larger than the sum total of the past 15 years. This reflects high liquidity of Saudi investors,” Al-Dakheel added.
Last December, Capital Market Authority (CMA) announced three important executive bylaws aimed at regulating the market, encouraging the public to invest in stocks with confidence and preventing fraudulent practices. The new laws regulate flotation of bonds, set out the principles for the enrolment of bonds and elucidate market etiquette. Jemaz Al-Suheimy, head of the CMA, highlighted the significance of the three laws, saying they would protect investors and preserve market credibility without putting any unacceptable burden on the shoulders of investors, intermediaries and financial consultants. He said the new laws would encourage the formation of more joint stock companies.
The law prohibits false stock exchange deals, manipulation of opening and closing prices and making orders for bonds without any intent to implement them. “It also prohibits officials, including board members and administrators, from leaking sensitive information that would affect prices of bonds,” the CMA chief said.
Al-Dakheel said the Saudi bourse is capable of accommodating more IPOs by companies as well as sales of state-owned shares in public corporations. Economist Ehsan Buhaliga has expected the number of listed companies would reach 100 by the end of this year. At present there are only 74 companies.
According to Dr. Nahed Taher, senior economist at the National Commercial Bank, companies listed on the Saudi stock market were expected to make a profit of SR38 billion by the end 2004. She also revealed that the assets of participating companies in the market exceeded SR576 billion at the end of August 2004 and that 50 percent of the value of these stocks is exchanged in the market. The most important sectors, which have seen high increases in their stock prices, have been communications, banks and industry.
Market capitalization in the six GCC markets increased from $120 billion in 2000 to $522 billion in 2004. The aggregate volume of shares traded similarly increased from 7.9 billion to 50.9 billion in the same period, with the cumulative value of the shares increasing from $22.9 billion to $551.9 billion.
Al-Dakheel said the Riyadh forum would discuss ways of further strengthening the Kingdom’s capital market. Experts from within and outside Saudi Arabia would take part in the two-day deliberations. The Capital Market Authority will explain the rules and regulations related to share floating and registration of companies.
Prominent participants at the forum include former Finance Minister Muhammad Aba Al-Khail, Kuwait Stock Market Director Dr. Saafek Al-Rekaibi, Dr. Fahd Al-Mubarak, chairman of Malaz Financial Consultancy Center, Bishr Bakheet, director of Bakheet Financial Advisors, and Dr. Henry Azzam, an economist.