Saudi debt market liquidity soars to $666m in 2023

Mohammed El-Kuwaiz, chairman of the Capital Market Authority, speaks at the Derivative Market and Derivatives Forum 2024 in Riyadh on Sunday. AN photo
Mohammed El-Kuwaiz, chairman of the Capital Market Authority, speaks at the Derivative Market and Derivatives Forum 2024 in Riyadh on Sunday. AN photo
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Updated 08 September 2024
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Saudi debt market liquidity soars to $666m in 2023

Saudi debt market liquidity soars to $666m in 2023

RIYADH: The liquidity of Saudi Arabia’s debt market surged to SR2.5 billion ($665.9 million) in 2023, a significant increase from SR800 million in 2019, according to Mohammed El-Kuwaiz, chairman of the Capital Market Authority.

El-Kuwaiz made these remarks during a panel session at the Derivative Market and Derivatives Forum 2024 in Riyadh.

He said this growth reflects the sector’s expansion and its progress toward aligning with the scale of comparable global economies.

“Regarding liquidity, in 2019, the annual liquidity and trading volume in the debt market was approximately SR800 million. By 2023, this figure has grown to around SR2.5 billion, more than tripling despite a decrease from previous years due to rising interest rates,” El-Kuwaiz said.

He continued: “Currently, the debt market’s size relative to the Kingdom’s economy is less than 20 percent, specifically around 18-19 percent. In comparison, similar countries have debt markets that represent 30 percent or more of their economies.”

El-Kuwaiz said that, given the expected growth of the Saudi economy, the debt market has already experienced substantial expansion over the past four years.

To align with international markets and address the growing financial demands of the economy, the Saudi debt market is expected to at least double, if not more, over the next five years. This expansion is crucial for maintaining the market's competitiveness and supporting the country’s economic development.

El-Kuwaiz mentioned: “We anticipate releasing the final version of the new regulations next month. This will be the most significant update concerning issuance and offerings in the debt market. While we have made considerable progress, there is still much work ahead.”

He added that the Saudi debt market is more accessible to foreign investors compared to the stock market, which often requires specialized knowledge.

“Previously, Saudi issuers had to conduct debt issuances outside the Kingdom, often in foreign currencies. More than 80 percent of debt issuances by Saudi issuers were conducted abroad before 2019,” he explained.

However, following recent improvements in the system, the proportion of debt issuances occurring within Saudi Arabia has nearly doubled from about 20 percent to almost 40 percent. This shift indicates the increasing attractiveness and competitiveness of the local debt market. Additionally, for the first time in the past two years, bank ownership in the market has fallen below 50 percent, highlighting the entry of new investor categories.

El-Kuwaiz also pointed out that the global debt market is significantly larger than the global equity market. At the end of 2023, the total value of global stock markets was approximately $115 trillion, while the value of global debt markets ranged between $140 and $150 trillion. This disparity reflects the fundamental nature of debt markets.

El-Kuwaiz highlighted that the current conditions are ripe for advancing the debt market, thanks to recent developments such as the issuance of the bankruptcy law, the integration of the local market with international depositories to attract foreign investors, and reforms to the tax system for sukuk issuers, investors, and funds.

“We have embarked on the third wave of development for the Saudi financial market by activating debt instruments. The introduction of bankruptcy laws was crucial for energizing the debt markets,” he said.

International issuances planned

Majeed Al-Abduljabbar, CEO of the Saudi Real Estate Refinance Co., shared that in the past three years, his company has become the second-largest issuer in the Kingdom, following the Saudi government.

“In the last three years, we have issued approximately SR20 billion. This year, we plan to execute our first issuance in dollars, aiming to diversify our issuances between riyals and dollars,” Al-Abduljabbar said during the second panel session.

He added: “Our ambition is to significantly increase international issuances. We have made considerable progress in securitization and are focusing on ensuring that supply and demand are established from the outset.”

Al-Abduljabbar noted that to ensure the success of securitization in the Kingdom, it is essential to coordinate with banks and mortgage finance companies to create a robust supply. “We are collaborating with our partners to provide a supply that can be effectively utilized,” he said.

In the past two weeks, Al-Abduljabbar mentioned that agreements have been signed with major global firms, including BlackRock and King Street. He also hinted at forthcoming agreements with other companies to guarantee strong global demand rather than relying solely on local interest.

“Demand in Saudi Arabia is typically limited, often confined to commercial banks. Our issuances are predominantly within commercial banks or the private sector, with 70 to 80 percent of the market share. The number of regular issuers is not extensive, and there are insufficient issuances,” Al-Abduljabbar explained.

He emphasized the need for mandatory valuation processes in Saudi Arabia to ensure transparency and provide accurate pricing of financial products. By making valuation compulsory, the market can enhance pricing accuracy, boost investor confidence, and improve overall market liquidity.

Facilitating foreign investors

Hanan Al-Shehri, CEO of Edaa, highlighted that over the past four years, the volume of issuances in the debt market has surpassed that in the equity markets by more than six times, with the number of outstanding private issuances also doubling.

“Upcoming developments, such as the introduction of a market maker for debt instruments, are expected to have a significantly positive impact,” Al-Shehri said.

She elaborated: “The successful implementation of market makers in the stock market is being adapted for the debt instruments market. This crucial tool for increasing liquidity is anticipated to be operational before the end of the year.”

Al-Shehri also emphasized that the company is working on a project to facilitate private transactions outside of regular trading hours. “This is especially important for foreign investors and institutions who wish to trade outside official hours due to time differences,” she added.

Positive financial outlook

Waleed Al-Rashed Al-Humaid, CEO of Al-Rajhi Capital, reported that in 2024, their total value of issuances exceeded SR100 billion, whether in riyals or US dollars. “This achievement has positioned us as the leading issuer in the local market and the second globally in sukuk issuances, according to Bloomberg rankings,” Al-Humaid added.

From an international perspective, Luke Negal, head of Sovereign Bonds at CME Group, praised Saudi Arabia’s fiscal responsibility and positive financial outlook. “Saudi Arabia is well-positioned to reaffirm its role in international portfolios as a core and attractive holding. The current and upcoming five years present an ideal opportunity for the Kingdom to expand its presence in the global market,” Negal said.


World Bank looking to free up emergency funds for Lebanon

World Bank looking to free up emergency funds for Lebanon
Updated 07 October 2024
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World Bank looking to free up emergency funds for Lebanon

World Bank looking to free up emergency funds for Lebanon

WASHINGTON: The World Bank is looking to free up emergency funds for Lebanon, potentially including up to $100 million through the use of special clauses in existing loan deals, its managing director of operations told Reuters.

The Washington-based development lender currently has $1.65 billion in loans to the country including a $250 million loan approved this week to help connect dispersed renewable energy projects in the country.

Amid fighting across southern Lebanon, the bank was currently discussing ways in which it could help support the economy, including through the use of so-called Contingent Emergency Response Component clauses.

“We can use our existing portfolio and free up some money for really critical, short-term liquidity needs,” Anna Bjerde said.

CERCs are present in around 600 of the bank’s existing projects, globally, and allow it to redirect funds that have yet to be disbursed, if requested to by a government, for example after a health or natural disaster, or during conflict.

Lebanon has yet to make such a request, Bjerde said.

After a year of exchanges of fire between Hezbollah and Israel mostly limited to the frontier region, the conflict has significantly escalated in Lebanon.

Lebanon’s government could choose to use an existing social protection program that was put in place during the COVID-19 pandemic that allows for financial support to be sent to individuals, Bjerde said.

“It has the benefit of being totally digital so you can reach people, plus it can be verified a bit... so we will also probably use that to top up the social safety net for those that are particularly affected.”

Up to 1 million people have been internally displaced in the country, she added: “So it’s important we focus on that.”

Lebanon’s Finance Ministry and Economy Ministry did not immediately respond when asked for comment.


PIF takes 40% stake in Selfridges in new partnership with Central Group

PIF takes 40% stake in Selfridges in new partnership with Central Group
Updated 07 October 2024
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PIF takes 40% stake in Selfridges in new partnership with Central Group

PIF takes 40% stake in Selfridges in new partnership with Central Group

RIYADH: Saudi Arabia’s Public Investment Fund on Monday announced a strategic partnership with Central Group, a leading conglomerate in retail, real estate, and hospitality.

Under this partnership, PIF will acquire a 40 percent stake in both the operating and property companies of Selfridges Group, while Central Group will retain the remaining 60 percent. The agreement involves new investments from both parties aimed at enhancing Selfridges Group’s market position and supporting future growth, according to a PIF statement.

Turqi Al-Nowaiser, deputy governor and head of the International Investments Division at PIF, commented on the collaboration: “We are excited to partner with Central Group in Selfridges Group, one of Europe’s most iconic luxury department stores. This transaction will enable Selfridges Group to strengthen its status as a premier retail destination.”

This partnership follows PIF’s binding agreement to fully acquire Signa Group’s interest in Selfridges Group and is subject to the usual regulatory approvals.

The alliance aligns with PIF’s strategy of investing in key sectors globally and is built on a shared vision to unlock additional value within Selfridges Group.

By leveraging PIF’s investment expertise and Central Group’s industry leadership, the partnership aims to accelerate Selfridges Group's growth, solidifying its role as a major player in the European luxury retail market.

Selfridges Group operates 18 premier luxury department stores across three countries, including Selfridges in the UK, De Bijenkorf in the Netherlands, and Brown Thomas and Arnotts in Ireland. Its flagship locations on London’s Oxford Street and Manchester’s Exchange Square are celebrated as cultural and retail landmarks.


Saudi Arabia adds 60 direct routes since launch of Air Connectivity Program

Saudi Arabia adds 60 direct routes since launch of Air Connectivity Program
Updated 07 October 2024
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Saudi Arabia adds 60 direct routes since launch of Air Connectivity Program

Saudi Arabia adds 60 direct routes since launch of Air Connectivity Program

RIYADH: Saudi Arabia has introduced 60 new direct air routes since the launch of its national Air Connectivity Program, according to Majid Khan, CEO of the initiative.

Launched in 2021, the program has played a crucial role in enhancing tourism by expanding the Kingdom’s air links with global destinations, solidifying Saudi Arabia’s status as a prominent aviation hub.

Khan emphasized the strategic advantage of Saudi Arabia’s geographical location, which allows access to Europe, Asia, and Africa within an eight-hour flight.

He shared these insights during an interview with the Saudi Press Agency at the Routes World 2024 Exhibition and Conference in Bahrain.

From January to October of this year, 12 new foreign airlines established direct routes to Saudi Arabia—a significant achievement compared to the global average of two to four new routes per country.

Khan noted that the Air Connectivity Program has successfully attracted various carriers while strengthening existing routes, contributing to a rise in inbound tourism.

Rashed Al-Shammari, deputy CEO of commercial affairs for the Air Connectivity Program, highlighted the importance of the Routes World 2024 event in bringing together global aviation leaders to discuss operations and expand air routes.

The program aims to showcase Saudi Arabia’s unique tourist attractions, including the Red Sea, AlUla, Riyadh, and Diriyah, all of which have received recognition from UNESCO.

Al-Shammari also revealed that the program has held over 100 scheduled meetings with international aviation stakeholders at the event, focusing on negotiating new routes and enhancing existing ones. The goal is to establish direct connections to over 250 destinations and attract more than 150 million tourists to the Kingdom by 2030.

Ali Masrahi, CEO of Cluster2, which manages 22 regional and international airports across Saudi Arabia, including Abha, Taif, Tabuk, Arar, Jazan, and Al-Baha, reported significant growth in flights and passenger numbers last year, with increases ranging from 15 to 18 percent. Notably, the third quarter alone saw a 15 percent increase in flights and a 12 percent rise in passengers.


Closing Bell: Saudi TASI records 1.23% rise to close at 11,913

Closing Bell: Saudi TASI records 1.23% rise to close at 11,913
Updated 07 October 2024
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Closing Bell: Saudi TASI records 1.23% rise to close at 11,913

Closing Bell: Saudi TASI records 1.23% rise to close at 11,913
  • MSCI Tadawul Index increased by 17.08 points, or 1.16%, to close at 1,492
  • Parallel market Nomu slipped, losing 6.79 points, or 0.03%, to close at 24,649.17

RIYADH: Saudi Arabia’s Tadawul All Share Index rose by 1.23 percent to reach 11,913.62 points on Monday mainly driven by a significant growth in Al Majed Oud Co.’s stock price alongside other top performers. 

The total trading turnover of the benchmark index was SR7.02 billion ($1.87 billion), as 185 of the listed stocks advanced, while 45 retreated. 

The MSCI Tadawul Index increased by 17.08 points, or 1.16 percent, to close at 1,492.  

The Kingdom’s parallel market Nomu slipped, losing 6.79 points, or 0.03 percent, to close at 24,649.17 points. This comes as 44 of the listed stocks advanced, while as many as 23 retreated. 

TASI also recorded one of the best intraday highs since June, reaching 1.5 percent growth. 

The index’s top performer, Al Majed Oud Co., saw a 30 percent increase in its share price to close at SR122.20, thanks to a strong financial performance during the first half of the year. 

The perfume manufacturer recorded SR513 million in sales, a 21 percent increase compared to the year before. The company also saw an 18.2 percent increase in net profit to reach SR119.5 million, according to a bourse filing. 

The firm attributed the growth in sales and net profit to a rise in the number of stores and the full presence of the Hajj season, unlike the same period of the previous year. 

Other top performers included Al-Baha Investment and Development Co. and Al-Omran Industrial Trading Co., with share prices rising by 10 percent to SR0.33 and 9.94 percent to SR39.25, respectively. 

Red Sea International Co. and Anaam International Holding Group also recorded positive trajectories today, with share prices rising by 9.88 percent to SR65.60 and 9.52 percent to SR1.38, respectively. 

Other Tadawul announcements include Almarai Co.’s acquisition of Hammoudeh Food Industries, a Jordanian dairy and cheese producer. 

Almarai Co. will acquire Hammoudeh through its subsidiary Teeba Investment for SR263 million, subject to adjustments. The move aims to strengthen Almarai’s presence in Jordan, aligning with its broader growth strategy of expanding within core markets. 

The acquisition will be financed through Almarai’s internal cash flows and remains contingent on meeting contractual conditions and receiving regulatory approvals in both Saudi Arabia and Jordan.

This transaction is expected to expand Almarai’s regional operations, enhance its product range, and leverage operational scale for increased growth and profitability. 

The Saudi dairy and cheese giant saw a 1.62 percent increase in its share price to close its Monday trading at SR56.50. 

Rasan Information Technology Co. has also announced a board recommendation to increase its capital from SR75.8 million to SR77.5 million by capitalizing retained earnings. 

This increase includes the issuance of 1.7 million ordinary shares allocated to an employee share program as part of a long-term incentive plan. 

The recommendation will be subject to approval by the upcoming Extraordinary General Assembly, the date of which will be announced after securing the required regulatory approvals. 

Rasan Information Technology Co. closed the day with a 5.17 percent increase in its share price to reach SR61. 


Saudi PIF’s Aseer Investment Co. inks deal with private sector to develop tourism project

Saudi PIF’s Aseer Investment Co. inks deal with private sector to develop tourism project
Updated 07 October 2024
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Saudi PIF’s Aseer Investment Co. inks deal with private sector to develop tourism project

Saudi PIF’s Aseer Investment Co. inks deal with private sector to develop tourism project
  • Deal signed with Nimr Real Estate and the National Co. for Tourism, or Syahya, to propel the project
  • Partnership seeks to be model for multiple collaborations with private sector investors and create more regional job opportunities

RIYADH: Saudi Arabia’s Abha city has secured a new investment partnership to boost tourism by developing culturally rich dining and retail experiences. 

The Public Investment Fund’s firm Aseer Investment Co. has signed the deal with Nimr Real Estate and the National Co. for Tourism, or Syahya, to propel the project, the Saudi Press Agency reported. 

This aligns with the objectives of developing Abha, which will offer a range of benefits, including retail stores that reflect the cultural heritage of the Asir region. 

The partnership also seeks to be a model for multiple collaborations with private sector investors and create more regional job opportunities. 

Investments in the region are expected to create between 14,000 and 18,000 job prospects and contribute to up to 6 percent of the non-oil gross domestic product within 10 years, as outlined by the CEO of AIC, Osama Al-Othman, in February. 

Under the National Tourism Strategy, Saudi Arabia aims to attract 150 million visitors by 2030 and increase the sector’s contribution to the nation’s GDP from 6 percent to 10 percent.

The latest agreement seeks to empower the local community and develop and diversify the regional economy in line with PIF’s strategy. 

Speaking during a press conference on the Kingdom’s tourism plans that was held in July in Asir, Minister of Tourism Ahmed Al-Khateeb said the region enjoys moderate weather during the summer season and low temperatures compared to most cities in the world.

Visitors can enjoy various attractions, historic villages, local produce farms, delicious cuisine, and renowned locations set to provide rich cultural experiences, the minister said at the time.

Al-Khateeb said there is a significant demand and focus on the hospitality sector in the region and there are now 10 projects funded by the Tourism Development Fund, with an investment size of approximately SR1 billion ($266 million).

In February, during PIF’s second Private Sector Forum, Prince Turki bin Talal, chairman of AIC, unveiled the company’s ambitious plans as it embarked on its operational journey to make the area the number one tourist destination in the Kingdom.

Earlier this month, the Saudi Ministry of Tourism said the country achieved an 8.2 percent growth in spending by foreign visitors during the first half of 2024, compared to the same period in 2023. 

Total expenditures amounted to about SR92.6 billion, while the Kingdom posted a travel account surplus of around SR41.6 billion, the Saudi Press Agency reported at the time. 

The increase in spending by visitors to Saudi Arabia is part of significant developments in the tourism sector.

The Kingdom also topped the list of G20 countries in terms of growth in the number of international visitors and an increase in global tourism revenues during the first seven months of the year, compared to the same period in 2019, according to the UN World Tourism Organization.

This confirmed the effectiveness of the efforts made by the tourism system to achieve global leadership for the sector by applying best practices in travel and hospitality development, improving services and products, and continuous cooperation with all government entities.