Saudi Arabia plans to nearly double the size of its stock market via a series of IPOs, a secondary market for SMEs, and new investment products, according to the country’s Capital Market Authority (CMA) on Tuesday.
Mohammed Al Jadaan, the CMA’s chairman, told Bloomberg that the Tadawul All Share Index (Tasi) will be expanded to 250 companies from around 170 currently within seven years, boosted by a series of government privatisations and private sector listings.
The Tasi’s market capitalisation will grow to match the size of Saudi Arabia’s GDP within this period, up from its current level of about 57 per cent of GDP, said Mr Al Jadaan, stressing that the government wants to “make sure that the market becomes a real representative of the economy in terms of size”.
The government has already announced plans for the listing of a less than 5 per cent stake in the state oil company Saudi Aramco, likely to occur before the end of 2018.
In addition to the new listings, the CMA is also working on rules to introduce derivative products and real estate investment trusts (Reits) by the end of the year.
The regulator is also planning a secondary exchange for small and medium enterprises, to be limited to “sophisticated investors,” according to Mr Al Jadaan.
The plans to overhaul the stock market come in the wake of an ambitious economic restructuring plan announced on Sunday by Saudi Arabia’s deputy crown prince Mohammed bin Salman, designed to ease the burden of lower oil prices.
The measures include slashing subsidies and increasing taxes in an attempt to generate an additional US$100 bn a year by 2020.
The reform measures come as growth in the kingdom’s non-oil private sector rose in March, even while remaining lower than last year, according to a survey of local business managers.
Emirates NBD’s Saudi Arabia Purchasing Managers’ Index increased to 54.5 in March from 54.4 in February, against an average of 57.3 in 2015. A score of over 50 indicates economic expansion, with a sub-50 score indicating contraction.