Abdulaziz Abdulmohsen Binhassan

TBY talks to Abdulaziz Abdulmohsen Binhassan, Member of the Board of Directors of the Capital Market Authority (CMA), about milestones achieved over recent years, the SME ecosystem, and Initial Public Offerings (IPO) in Saudi Arabia.

What are CMA key priorities in regulating and developing the capital markets in the country?

Saudi Arabia’s Capital Market Authority (CMA) is committed to creating a robust, open, and dynamic capital market ecosystem. Investor protection, preserving market credibility, fostering financial innovation, and promoting sustainable finance are our key priorities. In addition, we aim for a capital market environment that is robust, inclusive, and innovative, making sure that it not only meets the demands of today’s investors but is also ready for the opportunities and challenges of tomorrow.

Through its strategic plan 2021-23, CMA seeks to position the Saudi capital market as a hub in the Middle East and one of the leading financial markets in the world: can you elaborate on the main initiatives you have been working on over the last years? What are the main milestones and highlights achieved during the last years?

In its pursuit to position Saudi Arabia as a leading financial hub, the CMA has implemented a number of revolutionary steps with the goal of moving from being a large and fundamentally local market to becoming the main capital market in the Middle East and one of the top 10 important capital markets in the world. A significant milestone was reached in January 2023 when the CMA approved the Implementing Regulations of the New Companies Law for Listed Joint Stock Companies. This come as part of the CMA’s objectives to regulate and develop the Capital Market and contribute to achieving the CMA’s strategic objectives by enhancing confidence and raising the level of governance in the capital market. The CMA’s emphasis on developing a strong regulatory framework has also been crucial in guiding the Saudi capital market toward sustainable financing. In 2022, CMA has approved the Securities Exchanges and Depository Centers Regulations, indicating CMA’s continuous commitment to market modernization, openness, and investor trust. As a result of these recent efforts, the Kingdom of Saudi Arabia has continued its progress in the IMD World Competitiveness Yearbook for 2023 achieving the third rank among the G20 nations’ level.

The CMA has been working on the implementation of the Financial Sector Development Program (FSDP). Can you provide an overview of the program and its impact on the capital markets and financial sector in Saudi Arabia?

The Financial Sector Development Program plays a crucial role in shaping the future of Saudi Arabia’s financial sector by encouraging income diversification, boosting savings, and providing a range of financing and investment options. The Program is promoting economic expansion and diversification in the Kingdom by establishing a strong, vibrant, and stable sector.
As the Kingdom’s economy grows, the Program is strengthening financial sector institutions, expanding the financial market, boosting savings, and fostering the rise of fintech firms in the Kingdom’s aim of a world-leading financial sector.

Saudi Arabia has taken significant steps to enhance its capital market infrastructure and attract foreign investors. How would you assess the progress made so far and what are the key achievements in this regard?

The CMA has made major efforts in recent years to increase the attractiveness of the Saudi capital market to foreign investors and to encourage their entry and participation in the trading and offerings. Since allowing foreign investors to directly invest in the capital market in 2015, the Saudi Capital Market has evolved from a local market to one where the foreign investor participates in daily trading at rates exceeding 17%, compared to less than 4% before. One of CMA recent efforts is the approval of the Rules for Foreign Investment in Securities, which is expected to have a positive impact on boosting liquidity in the Saudi market, deepening and raising its attractiveness, and enhancing its global status. The approval the Rules adds a new channel for foreign investment in Main Market-listed shares by allowing all foreign natural and legal persons to invest in Main Market-listed shares through DPMs. As for the achievements of Saudi Arabia’s capital market in foreign ownership, it has witnessed remarkable growth, reaching unprecedented levels in recent years. In 2022 alone, net foreign investment in the Main Market surged to about SAR 184 billion, marking the highest influx since the market’s joined the FTSE Russel Emerging Market Index in 2019. Furthermore, the value of foreign investor ownership reached SAR 347 billion, an increase of 13.8% compared to 2021, constituting approximately 14.2% of the total free float on the Main Market. This robust foreign participation underscores global confidence in Saudi Arabia’s financial market.

The introduction of the Parallel Market (Nomu) was an important development for small and medium-sized enterprises (SMEs). Can you share the benefits that this market has brought to SMEs and the efforts taken to encourage their participation?

Nomu is a parallel equity market that acts as an alternate venue for companies to go public with lighter listing requirements; participation in this market is limited to qualified investors. Opportunities for Saudi Arabia’s small and medium-sized firms (SMEs) have been transformed as a result. By the end of Q2 2023, the market had experienced a striking surge in activity, with the number of listed businesses having doubled to 62, an increase of 100% compared to Q2 2022.

Investor protection is crucial for the credibility and stability of any capital market. What measures has the CMA implemented to ensure transparency, fairness, and accountability for investors in Saudi Arabia?

Investor protection is prioritized by the Saudi Arabian Capital Market Authority (CMA), which recognizes how important it is for the credibility and security of the capital market. To fortify this commitment, the CMA has rolled out a comprehensive regulatory framework that meticulously details the procedures, requirements, and conditions for all market participants, ensuring transparency and fairness in every aspect of market operation. Complementing this is the CMA’s dedication to investor education. Through regular workshops, seminars, and awareness campaigns, the authority empowers investors with the knowledge they need, promoting informed decision-making. Advanced monitoring systems are in place to detect and deter any market irregularities or manipulations. Mandating timely disclosures from listed companies is another feather in the CMA’s cap, ensuring investors have access to accurate, up-to-date information. Collectively, these measures have shaped a market environment with trust, transparency, and accountability, instilling confidence in both domestic and international investors.

The digital transformation of the capital market has gained momentum globally. How is the CMA facilitating this transformation in Saudi Arabia, and what initiatives have been taken to enhance the use of technology in trading, settlement, and overall market operations?

With a view to keeping pace with the great digital transformation currently happening in the Kingdom and in order to achieve a shift in financial technology (FinTech) services and products, the CMA approved in 2022 the regulatory framework for equity crowdfunding, which aims to support FinTech innovations in the capital market in accordance with international best practices. The Kingdom continued to support developing and enabling the FinTech sector, as 2022 saw a number of 992 institutional investors, 7,248 Sophisticated Investors, and about 156,140 retail investors benefited from the services of FinTech companies.

Saudi Arabia has recently witnessed an increase in initial public offerings (IPOs). How is the CMA supporting these processes and ensuring a fair and efficient market for IPOs and privatizations?

The Saudi Capital Market Authority (CMA) and related financial entities have been at the center of the Kingdom’s developing capital market landscape, playing a crucial role in enabling and supervising a record number of offerings and listings. In fact, throughout 2022, the Saudi capital market broke its record in terms of offerings and listings in the Main and Parallel markets, with shares from 37 companies being offered for public subscription across both the Main and Parallel markets. These offerings amounted to an approximate value of SAR 40 billion. Additionally, the market saw the completion of offerings for 13 rights shares and 57 private placements, culminating in a total of SAR 67.4 billion in capital market offerings. Furthermore, a significant milestone was witnessed in 2022 with the first simultaneously dual Initial Public Offering listing between the Saudi Arabia Stock Market (TASI) and the Abu Dhabi Securities Exchange (ADX). This simultaneous listing exemplifies the CMA’s efforts to foster regional collaboration and enhance the attractiveness of the Saudi capital market to both domestic and international investors. By establishing a transparent, effective, and robust market environment for IPOs and privatizations, the CMA’s regulatory oversight and strategic efforts have helped Saudi Arabia establish itself as a prominent capital market hub in the region.