THE MAKING OF AN EPOCH

A memorable year

For the Saudi Stock Exchange, this was indeed a year to remember. A year in which we made, not incremental changes as in the previous years, but a quantum leap. Two global indices included us in their emerging market lists, while another will follow shortly. This was noteworthy in itself; what is remarkable is that we achieved this after being on watch lists for only one year. The Aramco listing at the close of the year brought us within the ranks of the leading exchanges globally, with a near five-fold growth in market capitalization. We began 2020, with the certitude that we were on the threshold of a new era.

Through the development of the Exchange we enhanced our contribution to the economy of the Kingdom and the goals of Vision 2030.

Underpinnings of an epoch

Tadawul’s Vision, Mission and strategies are closely aligned with those of Saudi Arabia’s Vision 2030, which will chart the course of the Kingdom for the next decade. One of the themes of Vision 2030 is building a thriving economy. Tadawul, by the very nature of its function and operations, contributes to this goal. The Financial Sector Development Program (FSDP), which is the most prominent of thirteen delivery programmes launched under Vision 2030, also has as its first objective the formation of an advanced capital market. The Exchange can also be confident that it will make a major contribution to some of the specific goals of Vision 2030; becoming the 15th largest economy in the world; increasing the SME contribution to the GDP to 35%; increasing foreign direct investment (FDI) to 5.7% of the GDP; and raising the share of non-oil exports in non-oil GDP to 50%. In 2019 we made a very significant contribution to the SME sector through major developments in the parallel market. There was also an exponential growth in the number of Qualified Foreign Investors (QFIs), which will continue to bring returns by way of increased FDI flows in the future.

Tadawul has now acquired more international visibility and is seeking to expand its activities regionally and worldwide. We do not adopt a short-term insular approach.

We seek to break boundaries and look for new opportunities. An example is the MOUs we signed with Abu Dhabi Stock Exchange (ADX) and Bahrain Clear. These agreements open the door for the parties to share knowledge and expertise, promote people development, align policies, and promote cross-listings. We expect that the results will be win-win for stakeholders in the respective markets. Our subsidiary Edaa also signed an MOU with Euroclear Bank which will help forge links between the depositories, in turn enhancing access to local and foreign investors. Tadawul has positioned itself as an innovator and not a follower. A demonstration of this was the entry of ETFs into the debt market which was a pioneering step.

Tadawul does not confine its strategies to those which will lead to immediate economic and financial outcomes. We are increasingly concerned with environmental, social and governance (ESG) considerations, a trait we share with many stock exchanges globally. During the year, we strengthened our alignment with the goals of the United Nations Sustainable Stock Exchanges (UNSSE). In 2018, we identified five of the United Nations Sustainable Development Goals (SDGs) as the most relevant and appropriate ones to focus on in our sustainability activities and have developed programmes which support most of these goals.

As the new era dawns

The year under review was indeed an exceptional one for Tadawul. Our accomplishments give us much to build on and look forward to a great future for the Exchange. We expect to expand our global and regional links to further enhance our image in the global stock market arena. We also look forward to the introduction of new products and services that will provide an even better fit with the needs of diverse investors.

A development that has crucial implications for the future is the new Capital Market Law. The amendments brought through the Law have better aligned us with international standards of capital markets. The changes will strengthen mechanisms for compensating unfairly affected investors, fast-tracking the related procedures and increasing security of investors. This will enable new classes of securities and attract even more foreign investment.

I have to thank the CEO and the Board of Directors for their dedication and for contributing the wealth of knowledge and experience they have between them. The Senior Management Team has performed extremely creditably in keeping operations flowing smoothly amidst a plethora of changes; this was also made possible due to the dedication and commitment of our employees. I also have to acknowledge the very constructive role played by our regulator, the Capital Market Authority (CMA). I should not forget the brokers, investors, custodians, information service providers and other market participants whose association keep the wheels of our business turning. I look forward to the continued support of our stakeholders in ensuring that the Exchange realises its vision.

We look forward to expanding our reach geographically while broadening our product and service portfolio.

Sarah Al-Suhaimi

Chairperson