The debt market of Saudi Arabia is expected to double in the next five years in order to align with the international markets and take the growing financial demands of their economy into consideration.
According to the Chairman of the Capital Market Authority, Mohammed El-Kuwaiz the liquidity of the debt market in Saudi Arabia surged to SR 2.5 billion ($665.9 million) last year. This was a significant increase from 2019 which amounted to Sr 800 million. In a panel session at Derivative Market and Derivatives Forum 2024(DMDF 2024) in Riyadh, the Chairman made remarks relating to this topic.
The growth made by Saudi Arabia reflects the expansion and progress of the sector in terms of aligning with the scale of comparable global economies.
“Regarding liquidity, in 2019, the annual liquidity and trading volume in the debt market was approximately SR800 million. By 2023, this figure has grown to around SR2.5 billion, more than tripling despite a decrease from previous years due to rising interest rates,” El-Kuwaiz said.
The growing economy of Saudi Arabia has impacted the debt market and has experienced a substantial expansion in the past four years.
The debt market of Saudi Arabia is expected to double in the next five years in order to align with the international markets and take the growing financial demands of their economy into consideration. The expansion is important for the maintenance of the competition in the market and to support the country’s economic development.
The final draft of the new regulations are expected to be released next month as per the Chairman, El-Kuwaiz. He further mentioned that the Saudi Arabia stock market is easily accessible to foreign investors when compared to the stock market which requires specialized knowledge.
However, thanks to recent system improvements, the proportion of debt issuances in Saudi Arabia has nearly doubled, from roughly 20% to almost 40%. This development shows that the local loan market is becoming more attractive and competitive. Furthermore, for the first time in two years, bank ownership in the market has dipped below 50%, reflecting the emergence of new investment groups.
El-Kuwaiz also mentioned that the global debt market is bigger than the global equity market. The total global stock market was approximately valued at $115 trillion towards the end of 2034. On the other hand the global debt market ranged from $140 to $150 trillion. The basic characteristics of debt markets are reflected in this discrepancy.
El-Kuwaiz stated that recent developments such as the issuance of the bankruptcy law, the integration of the local market with international depositories to attract foreign investors, and tax reforms for sukuk issuers, investors, and funds have created an opportune environment for the debt market to grow.
The CEO of the Real Estate Refinance Co., Majeed Al-Abduljabbar states that his company has become the second largest issuer in the kingdom in the past three years following the Saudi government.
The company has issued about SR 20 billion in the past three years and plans to bring into light their first issuance in dollars this year. The aim is to diversify the issuances between riyals and dollars.
He added as he spoke at the second panel, “Our ambition is to significantly increase international issuances. We have made considerable progress in securitization and are focusing on ensuring that supply and demand are established from the outset.”
Al-Abduljabbar believes that it is essential to coordinate with the banks and mortgage companies in order to ensure success of securitization in the kingdom to create a supply which is robust.
Al-Abduljabbar stated that deals with large global corporations such as BlackRock and King Street had been signed over the last two weeks. He also hinted at future partnerships with other companies to ensure strong worldwide demand rather than relying simply on local interest.
Hanan Al-Shehri, CEO of Edaa, stated that during the last four years, the volume of issuances in the debt market has outpaced that of the equity markets by more than six times, with the number of outstanding private issuances doubling.
