TADAWUL

SAUDI EQUITIES POST ROBUST GAINS IN 2023

Saudi Arabia's Tadawul All Share Index emerged as the second-best performing market in the GCC region, standing out among the four markets that reported positive results throughout the year. Closing at 11,967.4 points, the index recorded an annual gain of 14.2%, which was impressive considering the challenging market conditions.

As 2023 drew to a close, global financial markets faced considerable uncertainties, fuelled by concerns surrounding interest rates, inflation, economic growth, and geopolitical tensions.

But the last two months of the year saw significant upswings, in stark contrast to a noteworthy decrease in benchmark bond yields. In the end, equity markets showcased an outstanding performance, as evidenced by the MSCI World Index posting a remarkable gain of 21.8%, marking its most substantial increase since 2019 and a significant turnaround from the previous year's 19.5% decline. The index demonstrated a robust recovery of 16% from a seven-month low reached at the end of October 2023.

Although the MSCI World Index reached a record level on the second-to-last trading day of 2023, it experienced a slight dip on the final day, settling at 3,169.18 points. The S&P500 witnessed a gain of 24.2%, and the tech-heavy Nasdaq surged by an impressive 43.4% throughout 2023. Among major markets, Japan's equities emerged as the top performer, posting a gain of 28.2%.

Gold was also buoyant, recording a gain of 13.1% throughout the year and reaching all-time highs in several countries due to heightened geopolitical concerns. Conversely, the US dollar faced a decline of 2.1% against a basket of currencies. In contrast, commodities emerged as underperformers for the year, with crude oil prices experiencing a decline of more than 10%.

TADAWUL IMPRESSES

The Saudi market's resilience was buoyed by the dynamic primary market in Saudi Arabia, witnessing a series of initial public offerings (IPOs) throughout the year. There were seven new listings on the main market and 32 on the Nomu-parallel market, with ADES Holding securing its place as Saudi Arabia's largest IPO in the year. In September 2023, the Saudi Exchange introduced four new indices based on company size and IPO performance, providing a comprehensive view of market dynamics.

The sectoral performance illustrated widespread gains, with the REITS index being the only exception, experiencing a 7.7% decline. Particularly noteworthy were the software and services sector, posting a remarkable 91.1% increase, followed by capital goods and pharma, biotech and life science indices, recording full-year gains of 90.0% and 69.0%, respectively. All constituents within the index demonstrated substantial increases in their share prices throughout the year.

Major sectors like banking and energy also showed positive trends, with increases of 5.7% and 14.6%, respectively. Aramco dominated the annual trading activity chart with a traded value of SAR 78.1 billion.

NEW ENHANCEMENTS

In order to create a world-class stock market, the Saudi Exchange introduced three new enhancements through its subsidiaries, namely the Saudi Exchange, Securities Clearing Center Company (Muqassa), and Securities Depository Center Company (Edaa).

These include a more streamlined order flow mechanism empowering market participants with advanced tools for dynamic short-selling activities. The exchange also introduced fast buy-in trades settled on the same day (T+0), adding an extra layer of eciency to trading. The negoti ated deals framework now also provides investors with the flexibility to tailor settlement cycles (T+0 to T+5) based on their deal dynamics.

Muqassa’s clearing services includes equities, sukuk, bonds, and traded fund markets. New post-trade services include rectifying trade before settlement, average price trades or split price trades, and other enhancements and services.

Finally, Edaa introduced a new central securities depository system and post-trade services aligned with global standards.

“The introduction of these enhancements, which are the largest in the history of the Saudi capital market, will provide investors and market participants with a wide range of investment opportunities and enable access to new and diversified financial instruments to manage risk and benefit from market movements,” according to the exchange.

The upgrades will also enhance investor access, improve risk management tools, and enhance trade and post-trade services for entities operating in the Saudi capital market, such as institutions and banks, as part of wider efforts to reinforce the Saudi capital market’s position as an attractive global investment destination.