Saudi market poised for expansion powered by diversified economy, IPO surge

In 2023, the Saudi stock market experienced a notable rise, climbing over 14 percent year-on-year to close at 14-months high. This upward trend was largely fueled by the diversification of the local economy beyond the oil sector and a series of ongoing market listings.

As we step into the New Year, many analysts and financial institutions are adopting a positive outlook for the Saudi stock market for 2024. They anticipate global interest rate cuts and a robust IPO market in the year ahead.

2024 Outlook for Saudi Stock Market

Turki Fed’aq, a financial markets expert, shared his optimistic expectations for the Saudi market in 2024 during an interview with Al Arabiya Business. He forecast Saudi GDP growth to reach 4.4 percent, an increase from 3 percent in 2023. Fed’aq also predicts that oil prices could escalate to between $80 and $90 per barrel, further bolstering the local economy and the Saudi stock market.

A report by SNB CAPITAL projects that the Saudi stock market index will trade between 10,900 and 13,100 points in 2024. The report suggests a positive outlook for the stock market, fueled by significant interest rate cuts and the launch of various projects under Vision 2030.

Hussein Al Ruqayeb, in a separate conversation with Al Arabiya Business, highlighted the impact of growth in non-oil GDP, which is crucial for the government’s development plans. This growth positively affects all sectors, contributing to the Saudi stock market’s strong performance and its bright future as Vision 2030 projects start to bear fruit.

Al Jazira Capital forecasts that the main Saudi stock market index, TASI, will rise in 2024, supported by profit growth and expectations of increased market liquidity. In its recent report, the firm estimates the index’s fair value at 13,123 points, based on expected earnings, multiple of 19 times, for 2024 profits. This valuation indicates a potential increase of 13.1 percent from the current level.

Total market capitalization at the end of 2023 reached SAR 11,259.32 billion ($3,002.49 billion), an increase of 13.98 percent compared to the end of the previous year.

Saudi IPO Market in 2024

The Saudi stock market saw a total of seven listings on its main market in 2023, with some shares experiencing increases of over 90 percent since their initial listing.

Most of the newly listed shares saw significant gains in 2023, except for Morabaha Marina Financing stock. Al-Mawarid Company’s shares led the surge with an increase of 91.88 percent, followed by Jamjoom Pharma at 90.3 percent, SAL at 82.45 percent, and ADES at 79 percent. Morabaha Marina Financing shares were the only ones to fall, registering a 16.85 percent decline.

The number of listings in 2023 was reduced to seven, compared to 17 in 2022.

Executive Director of Saudi Tadawul Muhammad al-Rumaih attributed this in a previous interview with Al Arabiya Business to companies awaiting global events, rising interest rates, and their impact on market liquidity. Following the first offering and strong individual investor interest, companies gained confidence, buoyed by market liquidity and a keen interest in subscriptions.

Al-Rumaih also mentioned that there were more than 50 listing applications across all markets, showcasing optimism about the future, a positive climate, and economic growth, especially in the non-oil sector. He noted that the Saudi market is one of the best globally. The Head of Advisory at GIB Capital Abdullah al-Hamid concurred with this outlook. He noted that early 2023 was challenging, with most analysts pessimistic about stocks due to rising interest rates. However, confidence returned by mid-2023, with the market anticipating the listing of MBC shares beginning of 2024.

In an interview with Al Arabiya Business, Al-Hamid added that the Capital Market Authority has more than 47 ready listing applications, indicating that 2024 could be a strong year, particularly if accompanied by a reduction in interest rates.

Aljazira Capital also anticipates that the Saudi market will continue to lead the activity of initial public offerings in the Gulf Cooperation Council (GCC) countries.

2024 Saudi stock recommendations

SNB Capital recommends focusing on stocks in the banking, tourism, and healthcare sectors for the current year, specifically highlighting Aramco, STC, Bank, Albilad, SGS, Budget and Al-Dawaa.

Aljazira Capital has also identified its top picks from the stocks within its coverage, which include Al Rajhi Bank, Alinma Bank, United Electronics Company, Jarir, STC, Perfect Presentation, Mobily, Saudi Ground Services, Seera Group, Theeb, Yamama Cement, Eastern Province Cement, SABIC, and Sipchem.

The firm notes that the basic materials, energy, and banking sectors are expected to be key contributors to the growth of the net profit of the main market index (TASI).

In an interview with Al Arabiya Business, CEO of Villa Financial Hamad Al-Olayan suggested that the sectors presenting opportunities in 2024 include petrochemicals, cement, insurance, and banking.