Saudi equities post solid first-half gains as earnings outlook and reforms supported sentiment. The equity market was driven by resilient corporate earnings, continued economic diversification and investor confidence in the kingdom's long-term reform agenda. While market performance moderated toward the end of the period amid lower oil prices and heightened geopolitical uncertainty, the broader trend over the first six months remained positive.

The Tadawul All-Share Index (TASI) gained 2.9% during the first half of 2026, making it one of the strongest performing markets in the GCC region over the period. The advance was underpinned by broad participation across sectors, with financials, industrials and utilities providing much of the market's support, while energy-related stocks generally lagged amid softer crude prices.

The Saudi market’s resilience in the midst of global uncertainty is reflective of the wider world economy. The MSCI World Index is up 10.4% for the first six months of the year. Similarly, the MSCI Asia Pacific is up 20.3%, with the wider MSCI Emerging Market Index rising 22.7%, partially led by technology and artificial intelligence stocks, which have buoyed market sentiment.

S&P500, the world’s largest market, was up 9.6%, while the broad Dow Jones Industrial Average rose 8.9%, and the tech-heavy Nasdaq Composite index was up 12.8% in the first six months.

POSITIVE INVESTOR SENTIMENT

Brent crude prices are up 26% in during the first half of the year, while investors remained attentive to global interest rate expectations and regional geopolitical developments. Nevertheless, Saudi Arabia’s domestic economic fundamentals remained supportive, with non-oil activity continuing to expand under Vision 2030 initiatives and government investment programmes.

Valuations also remained relatively balanced following the market's advance. By the end of June, the Saudi market traded at a price-to-earnings (PE) ratio of approximately 16.8 times trailing earnings, placing it broadly in line with its historical premium relative to other GCC markets. The valuation reflects investors' expectations for continued earnings growth, particularly among companies exposed to domestic infrastructure, consumer spending and industrial expansion, while remaining below the multiples typically associated with high-growth international equity markets.

Trading activity remained healthy throughout the first half as institutional participation continued to strengthen. Saudi Arabia remains the region's largest and most liquid equity market, benefiting from deep domestic capital pools, expanding foreign investor participation and continued inclusion in major global equity indices. Liquidity has also been supported by an active pipeline of listings over the past year, reflecting the continued development of the kingdom's capital markets.

DIVERSIFIFIED INDEX

The first half of 2026 also highlighted the increasingly diversified composition of the Saudi market. Listed companies now oer investors broader exposure to banking, telecommunications, healthcare, retail, logistics, utilities, mining, and industrial manufacturing. This diversification has reduced the market's sensitivity to fluctuations in oil prices compared with previous years and strengthened its link to domestic economic activity.

In the first six months of the year, insurance led the gains with 23.6%, followed by energy (+9.8%), utilities (+6.2%), pharma, biotech and life sciences (+6.5%), consumer durables and apparel (+5.9%), and food and beverages (+5.4%). However, among the laggards were media -35.9%), health care equipment and services (-11.9%), and transportation (-11.3%).  

Banks (+2.9% over a six-month period) also continued to benefit from strong credit growth, robust capital positions, and sustained demand for project financing tied to strategic developments.

Looking ahead, investor sentiment is likely to remain closely tied to corporate earnings, oil price trends and the pace of implementation of large-scale economic projects. While external risks, such as geopolitical tensions and global monetary policy, could contribute to periods of market volatility, the expanding non-oil economy and continuing pipeline of public and private investment provide supportive medium-term fundamentals.

Overall, the first half of 2026 reinforced Saudi Arabia's position as the GCC's benchmark equity market. Strong year-to-date returns, healthy trading activity and reasonable valuations suggest investors continue to view the kingdom as one of the region's principal long-term growth markets, supported by economic diversification, capital market development, and sustained investment across key sectors.

FOREIGN CAPITAL INFLOW

On the international investment front, the Capital Market Authority revealed an increase in net international investment in the main market of approximately ⃁ 20 billion in 2025, rising from ⃁ 204.3 billion in 2024 to ⃁ 225.2 billion within one year. 

The number of international investors in the capital market increased by 8.8%, reaching approximately 161,000 by the end of last year compared to 147,800 in 2024.  

“As for legislation related to international investors, the CMA's decision to allow foreign investors to invest in the shares of listed real estate companies that invest in Makkah and Madinah was at the forefront of the regulatory and legislative decisions issued by the CMA, in addition to its publication of a public consultation on opening the Main Market to all categories of non-resident foreign investors, a regulation the CMA adopted at the beginning of this year,” the CMA noted.