Saudi stock market is bigger than country’s economy, says head of Financial Markets Authority


RIYAD: The Saudi stock market is now more important than the entire economy of the Kingdom, even without taking Aramco into consideration, said the chairman of the Capital Market Authority (CMA).

Speaking at a session hosted by the Saudi Economic Association (SEA), Mohammed El-Kuwaiz revealed that there were 54 other pending enrollment requests – of which 31 are direct enrollments – while he emphasized the strength of Tadawul.

With the addition of Aramco, Tadawul is four times the size of the economy, El-Kuwaiz said.

He argued that the great impetus of a large number of companies for direct listing is due to the fact that the Kingdom was the first to apply the direct listing mechanism in the GCC region.

He pointed out that CMA is currently evaluating the direct listing mechanism for the possibility of introducing improvements that are necessary before applying the experience to the main market.

Regarding the distribution of subscriptions between individuals and institutions, El-Kuwaiz indicated that the percentage of subscription for individuals was determined by the regulation of the book of construction instructions.

Amendments were applied in 2018, in particular to give the company and the financial advisers greater freedom in determining the categories participating in the subscription and allocation ratios.

This has dramatically increased flexibility for companies wishing to list their shares, and it is one of the many factors that contributed to the success of Saudi Aramco’s IPO, El-Kuwaiz said.

The payout ratio between institutions and individuals may change depending on the nature of the offer, according to El-Kuwaiz. That can change from offer to offer, and it happened during the initial public offering of Saudi group Tadawul, he said.

El-Kuwaiz added that the role of the primary market maker is to provide liquidity to the market, not to protect the market from rising or falling.

He added that there is a market maker for government debt securities because they are dealt directly with a group of banks that buy from the state, and they offer two prices for those who want to buy and sell.

He pointed out that the Saudi group Tadawul is working on the development and expansion of the market making circle to include shares in the main market and Nomu.

Saudi group Tadawul hopes to raise around $ 1 billion from the IPO it launches this month, it was reported earlier this week.

The original plan was to allot 10 percent of the 36 million shares to individuals, before increasing it later to 30 percent.

However, he is now heading straight for the higher figure, and Tadawul Group CEO Khalid Alhussan said on Friday that the increase had always been seen as a potential option.

Retail subscribers in the Saudi market represent a very significant slice of the size or attractiveness of the market in terms of daily and monthly revenue, he said.

The process of building the order book for institutions will take place from November 21 to 26.

Saudi Tadawul will launch a new product in the derivatives market and existing services and products will see further changes, Alhussan told the Aleqtisadiah newspaper.


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