Saudi Arabia’s Tadawul targets Asian investors to boost liquidity, market expansion: Bloomberg

RIYADH: The Saudi Stock Exchange is intensifying its focus on attracting Asian investors to enhance liquidity and activity in the region’s largest market, Bloomberg reported. 

Foreign ownership in Saudi capital markets has surged over the past five years, hitting record levels in 2023. Net foreign investments reached SR198 billion ($52.77 billion), a 7.7 percent increase from 2022, with total foreign ownership rising to SR401 billion by year-end, according to the Capital Market Authority. 

Direct investment was first permitted in June 2015 with the launch of the Qualified Foreign Investor program. Since then, the CMA has worked to attract global investors and diversify the Kingdom’s previously domestic-focused capital markets. 

Bloomberg said that the Saudi Tadawul Group Holding Co. is particularly targeting Asia, recognizing the potential of investors from both the East and West, citing the group’s Chief Strategy Officer Lee Hodgkinson. 

In a recent episode of Bloomberg’s Tiger Money podcast, the top official emphasized Asia as a key priority, particularly focusing on strengthening ties with Chinese investors. 

“Connecting Chinese and Saudi investment flows bilaterally benefits not just the exchanges and investors but also boosts the liquidity of listed companies,” Hodgkinson said. 

He added that the group is committed to deepening relationships with Chinese counterparts and anticipates increased collaborative efforts. 

In line with this strategy, two exchange-traded funds focused on Saudi Arabian stocks were launched in Shanghai and Shenzhen last month. 

These ETFs reflect the growing investment ties between China and Saudi Arabia as both nations seek to diversify their portfolios away from traditional Western markets. 

Earlier this year, the main exchanges in Hong Kong and Riyadh co-hosted a conference in the Asian city, underscoring the mutual interest in expanding financial product offerings for both Chinese and Middle Eastern investors. 

Hodgkinson also highlighted the vast investment potential from China, India, and other Asian markets. “We see a tremendous opportunity to attract investment into the Kingdom, and ETFs provide an excellent structure for that,” he said. 

Bloomberg said that the Saudi Tadawul Group is looking to strengthen its position in areas beyond equity markets, including debt markets, commodities, indices, data analytics, as well as post-trading services like custody and settlement. 

“We are strong in our core and regional markets, but as we expand internationally, we will need to compete more aggressively,” Hodgkinson added. 

The top official at Tadawul indicated that increased mergers and acquisitions, partnerships, and collaborations are anticipated.