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The Saudi Stock Exchange

By Arvind Singhi

KPMG

 

The roots of the Saudi stock exchange or Tadawul could be traced to the mid-1930s, when the Arab Automobile Company was established as the first joint stock company.  The market remained informal until 1980s when the government embarked on institutionalizing and regulating the market. The Saudi Stock Exchange (Tadawul) Company was formed in March 2007. Today, Tadawul hosts 146 companies from multiple industries and is regulated by the Kingdom’s Capital Market Authority.

The listed equities are categorized among 15 sectors. The Insurance sector has the strongest presence with 31 registered companies followed by the Banking and Financial Services sector with 15 companies. However, in terms of market capitalization, the Petrochemical sector accounts for 37% of the total followed by the Banking and Financial Services sector with 27% . The figures below highlight the structure of the Tadawul as of yearend 2010.

 

The Saudi Stock Exchange experienced two major setbacks in the last few years.

The crash in 2006 pulled the Tadawul All-Share Index (Tasi) down from more than 20,000 points in February 2006 to just 7,933 by December in the same year. Most experts agree that the fundamental reasons behind the downturn was an overall lack of corporate transparency, ignorance of the fundamentals of investments among small investors, and the significant margin lending by the banks.

The crash in 2008 brought the Tasi down to 4,802 points by the end of 2008 compared to 10,717 at the beginning of 2008. The 2008 downturn in the stock market was a direct consequence of the global financial crisis.

The Tasi closed at 6,620 at the end of 2010.

 

A major effect of the most recent crisis is the reduction of small investors in the market and a consequent drop in the overall volume traded. The graph below shows a drop from an average daily volume of SAR 241 Mn in 2008 to SAR 132 Mn in 2010, a 45% drop.

 

Despite these setbacks,  the Tasi month-to-month declines during the crisis were relatively milder than those experienced by other GCC nations. Between 2008 and 2010, the average month-to-month Tasi fluctuation was -0.6%,  second only to Qatar which averaged 0.3%, and far better than Dubai at -2.7%.

 

The behavior of Tadawul in the recent crisis mirrors the Kingdom’s resilience to the global economic crisis. The stock exchange benefited from the robust performance of the Industrial, Petrochemical sectors, and Real Estate and Construction sectors.

Going forward, Tadawul is expected to continue providing wider product choices to consumers similar to the introduction of the first ETF (Exchange Traded Fund) in March 2010 and allowing foreign ownership through total return swaps. In addition, Tadawul is also expected to seek to attract more long-term institutional investors to balance the substantial participation by local retail investors. To achieve these goals, Tadawul will continue to implement robust governance best practices to bring greater transparency to the market and make the market more efficient.

 

Kuwait in Spain

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Our latest investment report on Kuwait was recently published in one of the leading Spanish dailies, ABC.  FindMe in Kuwait explores the economic perspectives of Kuwait and the country´s future plans to compete with its fast developing neighbours. Once the leading country of the Gulf, Kuwait has remained silent for the past decade. And although many would like to see faster changes, Kuwait is moving, at its pace, to them. Inexorably. Learn about who is who in Kuwait and read what the leaders say about their own future in our upcoming release: FindMe in Kuwait Mobile app.

 

Stay tuned - Stay Ahead

GGC launches FMS and FMB mobile apps

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GGC concludes FindMe in Bahrain

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Global Gulf Consulting has concluded its latest production on Bahrain, FindMe in Bahrain giving the country a fresh approach after a couple of difficult years of local demonstrations that matched the global recession.  Bahrain is a small island in the Arabian Gulf with an incredible potential for logistics, industries and tourism. FindMe in Bahrain was supported by both the public and private sector of Bahrain.  Banagas, Nass Corporation, BBK and DHL were GGC strategic partners in the development of the series among others.  

FindMe in Bahrain is available at the local bookstores Jashamal and online as well as in the Apple Store. It is a full business leisure and business guide for any investor or visitor interested in traveling to Bahrain or for those that already live there.

 

New release: FindMe in Saudi 2013 Edition

FindMe in Saudi offers a multi-faceted overview combining business and leisure, economy and heritage. The book aims to capture the current development of Saudi Arabia in the words of the people who live and work there. It is an authoritative source of information for investors, businessmen and travellers produced to firmly position KSA as an attractive investment destination.

In contains general information about the country´ economic performance and who is who as a sectorial overview and a leisure guide.    

FindMe in Saudi 2013
FMS 2012 A4 v15 web.pdf
Documento Adobe Acrobat [45.4 MB]

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