There is “real excitement” among global investors about the Saudi capital market, according to the Riyadh Forum

Saudi Arabia The capital market is very attractive in the eyes of global investors and the kingdom's authorities are pushing for more regulation to improve the market's accessibility and stability, with the aim of boosting confidence and attracting further international capital inflows, Saudi Capital panelists said Market Forum on Tuesday in Riyadh.

“We are trying to adopt the concept of enabling regulations instead of deregulations, and that is one of the things you may find different in Saudi development efforts,” said Abdullah Binghannam, the deputy for financing and investments at the Saudi Financial Regulatory Authority Capital Markets Authority (CMA).

“While deregulation could be an option in various parts of the world, and although we think it is very important, we believe that international investors are, above all, relying on trust, [and] Trust is seen as a catalyst for international inflows,” he said.

The CMA's efforts to open and increase confidence in Saudi Arabia's capital markets have resulted in more than 70 billion riyals ($18.7 billion), among other investments Initial public offering (IPO) Binghannam said the number of subscriptions from international investors exceeded the offers themselves.

“Naturally, [international investors’] Due to higher demand from local investors, the allocation was lower than this figure, but this is a very important signal of how the opening serves to raise capital,” he added.

Binghannam also said that growing the Kingdom's debt capital market and asset management industry, as well as introducing new tools to support companies in the capital market, will be the CMA's top priorities in the future.

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“There is a lot of excitement about what is happening now in the Middle East, but particularly in the Saudi market,” said Claire Suddens-Spiers, partner and co-head of global equity markets at Rothschild & Co. “The world is watching, and the world is watching and, more importantly, participating in what we now see as truly sustainable market growth in this region.”

“The Saudi market has grown very robustly because it has a very strong domestic investor base, both retail investors and a growing domestic asset management base,” said Richard Cormack, co-head of equity markets for Europe, the Middle East and Africa at Goldman Sachs.

“The regulatory framework that the CMA put in place was very strong and obviously encouraged issuers to come to market and that worked extremely well,” he said.

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However, Cormack also warned of excessive excitement among issuers and investors as a potential weak point in the market. He pointed out that last year, companies that went public on the Saudi stock exchange increased by almost 40 percent on the first day and by almost 70 percent within the first month. This has encouraged investors to bet on more IPOs.

“If that cycle is broken, and we've seen that break in other markets … then that ongoing enthusiasm could be at least temporarily dampened, and then it will have to rebuild itself,” Cormack said.

However, he pointed out that the fragility was more cyclical than structural, emphasizing that the market was vibrant and attractive, offering a price-to-earnings ratio of 21. The price-to-earnings ratio measures a company's stock price relative to its earnings per share.

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“From a regulatory perspective, there are still some developments that need to be facilitated [the successful listing of foreign companies]“But global companies that have ambitions in the Middle East or have regional shareholders, I imagine that will be a trend over time,” Cormack said.