chapter  3
26 Pages

The Financial Markets of Saudi Arabia

With the region’s largest hydrocarbon revenues, population and cash reserves, coupled with an ultra-wealthy merchant class active in trading, industry and finance, Saudi Arabia is home to the largest financial market in the Gulf Cooperation Council (GCC). Historically, for better or worse, the impetus and direction for the financial markets’ development has been topdown, state-driven and government-financed through institutions like the Saudi Arabian Monetary Authority (SAMA), the Public Investment Fund (PIF), the General Organization for Social Insurance (GOSI) and the Saudi Industrial Development Fund (SIDF). Thus, it is not surprising that in the same vein, or perhaps because of it, the largest Saudi industrial companies have mostly been state controlled. Yet, the government has made substantial efforts to increase public participation in domestic financial markets. The main tool for catalyzing this participation has been public share offerings (IPOs) in state controlled companies, of which there have been many. These offerings have fueled the growth of a financially savvy middle class, much of which is active on the kingdom’s stock exchange, the Tadawul. Today, IPOs of private sector firms as well as of the state controlled companies alike have become extremely common.