Globalization in the capital market of Saudi Arabia has been a significant driver of economic growth and transformation, particularly in recent years. Here are several key factors and developments that highlight the globalization of Saudi Arabia’s capital market:

1. Increased Foreign Investor Participation:

– The Saudi Exchange has seen a substantial increase in foreign investor participation. By the end of 2022, the number ofregistered Qualified Foreign Investors (QFIs) surged to 3,151, up from 118 in 2017. QFIs accounted for 19.6% of the trading value on the Saudi Exchange’s Main Market in 2022, a significant increase from 10.5% the previous year[1][4].

2. Regulatory Reforms:

– The Saudi Capital Market Authority has implemented regulatory reforms to make it easier for foreign investors to enter the market. For example, in September 2021, the authority revised regulations to relax registration criteria and investment limits for QFIs, facilitating their entry into the Saudi capital market[1].

3. Market Infrastructure and Technology:

– The Saudi Exchange has invested heavily in modernizing its infrastructure and technology. This includes streamlining the listing process, developing the Nomu – Parallel Market for smaller businesses, and enhancing trade settlement processes. These improvements have made the market more attractive to global investors[1][4].

4. Vision 2030 and Economic Diversification:

– Saudi Arabia’s Vision 2030, a comprehensive economic and social reform plan, aims to reduce the country’s dependence on oil and diversify its economy. This vision has attracted significant international investment, as it promises growth opportunities in various sectors beyond oil, such as tourism, entertainment, and real estate[3][4].

5. Landmark IPOs and Market Performance:

– The Saudi Exchange has captured global attention with landmark IPOs, including the world’s largest-ever IPO of Saudi Aramco in 2019. The market has continued to perform well, with IPOs in various sectors showing strong growth. For instance, in 2022, seven out of eight IPOs saw their shares increase by an average of 71% from listing to year-end[4].

6. Global Recognition and Integration:

– The inclusion of Saudi Arabia in the MSCI Emerging Markets Index has significantly increased foreign participation in the market. This inclusion has attracted substantial capital inflows, estimated to be around $45 billion, and has improved market liquidity and valuations[5].

7. Government Incentives and Support:

– Government initiatives such as the TOMOH-Elite program have incentivized smaller companies to list on the market, providing financial incentives, training programs, and access to networks of local and international investors and advisors. This has led to increased liquidity and coverage from both institutional and individual investors[5].

8. Expansion of Product Offerings:

– The Saudi Exchange has expanded its product offerings to include new indices and is planning further developments in the debt market, derivatives, and data packaging. These enhancements are aimed at appealing to global investors and issuers, making the market more competitive and attractive[4].

These developments collectively demonstrate the significant strides Saudi Arabia has made in globalizing its capital market, making it an increasingly important hub for international investment and economic activity.

Sources:

– [1] www.institutionalinvestor.com
– [2] www.sciencedirect.com
– [3] milkeninstitute.org
– [4] partners.wsj.com
– [5] review.brunswickgroup.com