Saudi Arabia’s financial markets are undergoing unprecedented transformations as part of a broader effort to diversify funding sources, reduce dependence on oil, and open doors to foreign investments. These moves are reshaping the financial landscape of the entire region.
Amid ongoing economic shifts, the Kingdom is racing against time to establish itself as a leading regional and global financial hub.
The Evolution of Financial Markets
Saudi financial markets are witnessing deep structural reforms under the country’s Vision 2030 economic transformation plan. These changes are not confined to the domestic market alone but have far-reaching implications across the Gulf region.
As non-oil sectors such as infrastructure, technology, and entertainment expand, the demand for alternative financing sources beyond traditional banking has surged, boosting private credit markets. Sovereign wealth funds are playing a key role in stimulating financial markets by funding projects and attracting both direct and indirect foreign investments, positioning Gulf economies on the global investment map.
A report by Independent Arabia published on February 27 highlighted that recent legislative reforms in Saudi Arabia, including amendments to IPO regulations and debt issuance frameworks, have facilitated corporate access to financial markets instead of relying solely on bank loans. These reforms have strengthened market liquidity and institutional investment in the economy.
Additionally, these measures have led to the inclusion of the Saudi stock market in global indices, enhancing its appeal to institutional investors. Further improvements in foreign ownership laws and listing requirements are expected to attract even more regional and international investments.
In this context, the Saudi Tadawul Group is actively working to promote mergers and acquisitions to develop the financial market and attract foreign investors.
Lee Hodgkinson, Chief Strategy Officer at Tadawul, told Bloomberg on February 20 that future opportunities lie in data and analytics. He pointed to a recent deal with Saudi-based Mubasher Financial Network, underscoring Tadawul’s commitment to expanding investment tools.
On the equities front, the average daily traded value surged to nearly $2 billion in 2024. According to Tadawul data, foreign investors from outside the Gulf Cooperation Council (GCC)—including the UAE and Qatar—accounted for nearly one-third of total trades by the end of 2024, tripling their share from 2020.
An Attractive Investment Environment
Economic expert and academic Ahmed Saddam believes that the development of Saudi Arabia’s financial markets has played a crucial role in funding developmental projects aimed at diversifying income sources.
Speaking to Al-Khaleej Online, Saddam noted that these financial markets have enabled the private sector to access the necessary capital, increasing its contribution to the economy to over 40%. This has helped create an attractive investment environment in the Kingdom.
Saddam further explained that the establishment of special economic cities, alongside major economic reforms, has been instrumental in attracting investors and enhancing market competitiveness.
Among the most promising new investment opportunities, he highlighted the tourism and sports sectors, which have diversified investments thanks to an advanced financial market that facilitates project financing.
He also suggested that legislative challenges related to taxation could be addressed through investments in special economic zones such as NEOM. By partnering with local investors, foreign companies can benefit from tax exemptions while also investing in government-supported projects, reducing their overall tax burden.
Saddam acknowledged that geopolitical fluctuations and oil price volatility naturally increase investment risks. For instance, a drop in oil prices could lead to project restructurings and reduce market liquidity.
Nevertheless, he emphasized that Saudi Arabia is working to mitigate these effects by diversifying its non-oil economy and offsetting market slowdowns through alternative financial instruments, such as government bonds.
Investment and Growth Strategies
Since the launch of its economic reforms in 2016, Saudi Arabia has witnessed remarkable growth in sectors such as real estate, technology, and tourism. The Kingdom aims to invest more than $2 trillion by 2030.
Additionally, the Saudi government plans to attract an extra $1.3 trillion in private sector investments, bringing the total targeted investments to $3.3 trillion under the National Investment Strategy.
Saudi Arabia seeks to increase the private sector’s contribution to total investments to 40%, ensuring the sustainability of economic projects and fostering a robust investment climate.
Given the scale of these investment plans—equivalent to 1.5 times the total loan book of the banking sector—there is a growing need for innovative financing tools such as bonds, hybrid capital, and direct credit. These mechanisms are deepening financial markets and opening new opportunities for investors.
According to Moody’s, non-oil sectors in the Gulf region, particularly in Saudi Arabia, are projected to grow by 4% to 5% in 2025-2026, assuming an average oil price of $75 per barrel.
Despite a surge in oil export revenues between 2021 and 2023, bank deposits increased by only $70 billion, as a significant portion of earnings was allocated to funding investments.
During the same period, Saudi Arabia’s net lending grew by 127%, exceeding collected deposits by more than $100 billion. To bridge this funding gap, Saudi banks turned to bond issuance, further fueling the expansion of financial markets.
Mohammed Al-Rumaih, CEO of the Saudi Tadawul Group, told Al Arabiya Business on February 18 that the Saudi market witnessed more than 45 IPOs in 2024. These offerings achieved an oversubscription rate exceeding 1,000% in the main market and 400% in the parallel market, making Saudi Arabia the fastest-growing market globally in terms of newly listed companies.
Similarly, Mazen Baghdadi, CEO of Alinma Investment, highlighted the significant growth in the debt instruments market over the past year. He noted that Alinma Investment had assisted multiple companies in issuing sukuk.
In his conversation with Al Arabiya Business on February 18, Baghdadi predicted further expansion in this sector, particularly as monetary policy shifts toward lower interest rates in the near future, making debt instruments a more attractive financing option.
He also emphasized that the Saudi market is continuing to diversify its IPO offerings, allowing investors to expand their portfolios across different industries. With companies from various sectors going public in recent years, this trend is expected to persist, further enhancing market depth and investor participation.
Challenges and Obstacles
Despite the momentum gained by Saudi financial markets, foreign investors remain cautious about certain challenges that could impact growth. Key concerns include geopolitical developments and oil price volatility, both of which can put pressure on liquidity in the region.
Legislative reforms also remain a priority to attract investments, particularly in areas such as value-added tax (VAT) and indirect taxation. Additionally, there is a need to modernize regulations like the corporate zakat tax, which applies to foreign investors as well, according to a report by Independent Arabia.
To mitigate these challenges, Saudi Arabia has established special economic zones such as King Abdullah Economic City and NEOM. These zones offer tax incentives and profit repatriation benefits, helping to boost foreign investor confidence and accelerate regional investment growth.
