The Saudi Capital Market Authority and the Saudi Stock Exchange ‘Tadawul’ are contemplating a set of new legislations aimed at the parallel financial market ‘Nomu’, as there is a serious commitment towards enhancing investment tools in this market and encouraging more companies to list.
In line with this commitment, Saudi Arabia is endeavoring to increase the proportion of micro and small enterprises listed in its local financial market. The Financial Sector Development Program aims to raise the percentage of these companies from the total number of listed companies to 40% by 2020.
In 2016, the proportion of listed micro and small enterprises in the Saudi financial market was about 34%, and it is anticipated that, due to positive economic reforms, this percentage will rise to 36% in the current year, 2018.
RelatedNews
Currently, there are about 10 companies listed in the ‘Nomu’ parallel market, spread across 7 sectors: basic materials, capital goods, commercial and professional services, durable goods, consumer services, luxury goods retailing, and technology applications and services.
‘Nomu’ serves as a new platform for small and medium-sized enterprises (SMEs) in Saudi Arabia, offering these businesses the opportunity to expand and access larger funding sources, as well as transition into public joint-stock companies, ensuring their continuity as commercial and economic entities.
In a related context, the agency ‘Standard & Poor’s Dow Jones’ expressed they have initiated consultations with investors regarding a potential upgrade of the Saudi financial market in its global emerging markets indices.
They are considering a reclassification of the Saudi financial market to reflect the progress made concerning the market reforms. The potential upgrade of the Saudi market has been under study for several years due to the market size, liquidity, Saudi Arabia’s economic and regional significance, and the progress made in allowing foreign investors to invest in the market.
‘Standard & Poor’s Dow Jones’ is seeking feedback from investors on whether the Saudi market should be upgraded in one go or in phases. If the market is upgraded, ‘Standard & Poor’s Dow Jones’ estimates that the Saudi market could potentially account for 2.57% of its benchmark emerging market index if fully listed, and 1.3% if 50% listed.
These developments come at a time when Saudi Arabia launched the ‘Financial Sector Development Program 2020’ last week, one of the programs to achieve ‘Vision 2030’, aiming to develop a diversified and effective financial sector to support the national economy’s growth, stimulate savings, financing, investment, and enhance the efficiency of the financial sector.
The program will introduce a range of initiatives to achieve the ‘Vision 2030’ objectives. These initiatives have been designed based on an analytical study of the program’s requirements. They include enabling financial institutions to support private sector growth, licensing new financial service providers, stimulating the financial sector to finance SMEs, and shifting towards technology-based payments instead of cash. These initiatives will be realized through several measures, such as making necessary legal and regulatory amendments and enhancing the application of mandatory vehicle and health insurance systems.
