Capital markets reforms are reshaping Saudi economy

Saudi Arabia, traditionally known for its dominant oil sector and associated industries, is several years into a journey of transformation designed to reshape its economy. A core pillar is a series of capital market reforms that have become a cornerstone for growth, opening doors to a more vibrant and competitive economy.

The most significant reform, and perhaps the one that has gained the most attention globally, is the lifting of foreign ownership limits from 20 percent to a full 100 percent. This shift has ensured that the doors to Saudi Arabia's most attractive companies are now open to the world’s investors. It signals a clear message that the Kingdom is open for business on a global scale. With this change, the Saudi government has positioned itself to attract billions of dollars in foreign investments.

With issues related to investor access resolved, the next priorities for fostering robust capital markets are transparency and accountability. Saudi Arabia has introduced several corporate governance reforms to enhance both areas. These include mandates for listed companies to disclose more information to investors, appoint independent directors, and establish internal controls. The result is enhanced trust and greater appeal to both local and international investors.

Saudi Arabia’s capital markets transformation has seen the creation of an exchange dedicated to sukuk, or Islamic bonds, making it easier for companies to raise funds through Islamic finance, and further expanding the Kingdom’s ability to attract global investors.

Bridging global finance with Saudi’s dynamic economic transformation, Bloomberg continues to empower its financial clients with the tools and insights necessary to thrive in the Kingdom’s burgeoning capital markets.

The impact of the Kingdom’s transformation agenda on capital markets has been impressive. In 2022, Saudi Arabia defied the global trend of reduced listings, recording almost 50 listings and raising over $10.7 billion in capital. The outlook remains promising, with a pipeline of companies eager to list. Foreign investment in local stocks also surged, reflecting increasing international confidence in Saudi Arabia’s market.

The scope of the reforms is not confined to equities alone, with debt capital markets also experiencing rapid growth. Saudi Arabia clearly recognizes the importance of diversifying investment avenues. Recent DCM regulatory and infrastructure developments — such as the opening of the Kingdom’s primary dealership to international banks for local currency government bonds — highlight the nation’s commitment to a multifaceted market.

In tandem with market reforms, Saudi Arabia is also nurturing its fintech sector. Technology-driven financial services hold immense potential to transform finance and investment, making it more accessible and affordable for all. The government’s support for fintech startups and the creation of a conducive regulatory environment reflect Saudi Arabia’s desire to embrace the future of finance.

Advancing sustainable development and green capital markets also remains a key priority for the Kingdom, as seen earlier this year with the signing of a memorandum of understanding between the Ministry of Economy and Planning, Capital Market Authority, and Saudi Exchange Co. Further work will be undertaken in Saudi Arabia to develop a sustainability selection criterion uniquely adapted to the Saudi market, as well as to develop a national environmental, social and governance disclosure framework for listed companies, infrastructure companies, and capital market institutions operating in the Kingdom.

The transformation witnessed in Saudi Arabia’s financial landscape since 2015 has been impressive. Liberalizing measures, post-trade reforms, and the growth of institutional trading have all contributed to this evolution. While challenges remain, such as addressing liquidity issues and the need for specialist third-party fund administrators and structural reforms in the asset management industry, the trajectory of the Kingdom’s capital markets is clear. Investors have welcomed these changes, leading to the Saudi stock market outperforming other emerging markets in recent years.

As Saudi Arabia continues its impressive journey towards economic diversification and capital market expansion, Bloomberg remains committed to supporting this evolution. Our collaborative ventures with key financial stakeholders in the Kingdom reinforce our belief in the nation’s future as a global powerhouse.

• Giuseppe Netti is regional head of sales Middle East & Africa, Bloomberg.