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Jeddah - Yasmine El Tohamy - Evolving regulatory framework attracting regional and global issuers to Saudi capital market
RIYADH: The size of Saudi Arabia’s stock exchange, its liquidity and the continuous change in the regulatory framework are some of the key factors making the Kingdom’s market attractive to regional and international issuers, noted a top Saudi banker.
Speaking at a panel during the Saudi Capital Market Forum in Riyadh on Feb.13, Zaid Ghoul, head of investment banking at SNB Capital, noted that the Kingdom’s parallel market Nomu is also growing steadily.
“The interesting thing to look at Nomu, which is the parallel market, is that it attracted 19 listings in 2022 compared to only three in 2021. So, this area of the capital market is really growing,” he added.
During the discussion titled “Public equity over-burn: where can the additional bandwidth come from?” Finlay Wright, managing director at Rothschild & Co., said there had been various high-quality initial public offerings that have come to Saudi Arabia and provided exposure to investors to explore new sectors, which previously they have been unable to do.
“On the back of that, certain select companies that meet the criteria for dual listing are actively exploring the possibilities, and it is really exciting for the Saudi market,” he added.
Wright pointed out that the increase in the number of IPOs in the Middle East, especially in Saudi Arabia, is happening due to very strong macro conditions combined with a strong oil price, adequately supported by structural and regulatory changes that have taken place.
Top experts who attended a panel discussion suggested that an active follow-up after IPOs is necessary to improve the capital market in the Kingdom further.
“There is clearly more to do around supporting an active following on market beyond the IPO. Like, as what happens after the IPO, whether companies can use the listings to access primary capital, and whether vendors can sell down secondary capital in an efficient form. That is the next leg,” said Martin Thorneycroft, managing director, and head of Cash Equity Capital Markets, EMEA at Morgan Stanley.
Wright noted that private equity owners who enter the Kingdom’s market would be eyeing to raise capital in 12 or 18 months and added that this is one of the main concerns for firms entering the secondary market in Saudi Arabia.
“When we spend time speaking to our clients who are considering listing in Saudi Arabia, one of the issues which can come up is, if I am a private equity owner or a growth capital company, we will look to raise capital in 12 or 18 months. How easy will that be for me, especially considering the fact that the secondary market is relatively undeveloped in the Kingdom,” said Wright.
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