The debut by Aramco IPO on Tadawul, stock exchange increased the country’s market capitalization by >300% thereby making itself the 9th largest stock exchange in the world. This also pushed the TASI index by ~4% (Q3 2019 to Q4 2019) to reach a level of 8,389.2 points.
Figure: Value Traded fluctuations corresponding to TASI Index fluctuations
Source: Tadawul Statistical Report
With limited financial awareness & limited opportunities, the participation in equity market has been dominated by institutional investments for a long time. It was observed that up until Quarter 3 of 2019, the retail participation was quiet stagnant with a growth rate of mere 0-1%. However, post launch of Aramco the market saw a sudden surge in the retail participation level. Aramco has been one of the world’s most profitable company for many years. It was years of trust instilled in the company that bought many first time investors to invest in the market. Owing to its global image, the company expected large foreign investments as well. But the global investors always held their concerns regarding company’s transparency towards its reporting & valuation. Therefore, the foreign investor participation did not meet the expected level.
Source: Tadawul and Ken Research Analysis
The onset of COVID 19 pandemic placed the world under a lockdown the economies around the world suffered losses & stock exchanges started hitting their decade lows. This was further supplemented by dropping oil prices as the demand for oil drastically reduced across the globe. While some investors exited the market some investors stayed with the perspective of making long term profits as well. The brokerages saw an increase in number of account openings dominated by retail participants who wanted to benefit from prevailing low prices. Top Brokerage firms witnessed a growth in monthly account opening rates around 30-40% higher compared to pre-COVID levels.
Being the largest exchange in Middle Eastern region, Tadawul lacked in offering diversification options. It was recently in July 2020, it launched trading of derivatives for the first time starting off with futures trading. This has been acting as a supplementary attraction factor to many retail participants. In order to make Tadawul a complete trading ecosystem, the government is expected to soon launch trading of options and commodities as well. Therefore in such scenario we can expect the retail participation to increase from 22% (Q3’19) to ~24% (end of 2020).
Al Rajhi Capital
Saudi Fransi Capital
HSBC Saudi Arabia
EFG Herms Saudi Arabia
Merrill Lynch KSA Co.
Falcom Financial Services
Deutsche Securities Saudi Arabia
Al Khair Capital
Emirates NBD Capital
Citigroup Saudi Arabia
Time Period Captured in the Report:-
Historical Period: 2015–2019
Forecast Period: 2020-2024
For More Information on the research report, refer to below link:-
Ankur Gupta, Head Marketing & Communications