Mohammed Bin Abdullah Elkuwaiz

Mohammed Bin Abdullah Elkuwaiz, chairman of Saudi Arabia’s Capital Market Authority, talks to John Everington about the surge in local listings, and the regulator’s plans for tokenised and virtual assets.

Q: Saudi Arabia and the Middle East defied the global trend of reduced listings in 2022. What is the outlook for the coming year?

A: Last year was a record year for us, with nearly 50 listings overall, including initial public offerings and direct listings. It was almost a record year in terms of fundraising as well, with around SR40bn ($10.7bn) of capital raised. This was second only to 2019, which saw the listing of Saudi Aramco.

It’s a trend that we see continuing. We at the Capital Market Authority (CMA) have a file of about 80 companies that are looking to list on the main market and its parallel equity market, Nomu. Looking further forward, we’re aware of roughly 80 more listing files that have been signed by financial advisers, that are working their way to us as the regulator. Not all of those will end up listing, but it gives you a sense of the number of opportunities.

Q: It’s been eight years since the CMA’s qualified foreign investor programme first allowed direct access to the Saudi market for international investors. Are you satisfied with the level of foreign investment in local stocks?

A: Last year was also close to a record year in terms of foreign capital coming into the country, with SR43bn of net foreign inflows, higher than the capital raised on equity capital markets for the year.

There has been a correlation between the number of offerings that you have and how attractive you are to foreign investors. So, our expectation is that as we have more offerings going forward, the market is likely to be increasingly attractive to outside investors. As more companies increase their free float, the result will be that our weighting in global indices will increase, further increasing foreign flows.

Last year was close to a record year in terms of foreign capital coming into the country

Q: Over the past year, the CMA has introduced new regulations in areas such as market making and prudential requirements for securities businesses. What further regulatory updates are being planned?

A: Following the recent regulatory activity related to the equity capital market, we’re confident we’ve achieved a reasonable level of maturity.

The debt capital market (DCM) is an area we’re putting a lot more emphasis on, not just in the CMA but the country overall. It’s a much newer animal here in Saudi Arabia and one that’s experiencing rapid growth in terms of overall size and demand, and also in terms of the pace of regulatory and infrastructure developments.

Most of the regulatory and infrastructure developments last year were focused on the DCM, and we’re already starting to see the results of that in terms of increased issuance by the private sector and increased liquidity. Obviously, there’s a bit of headwind to this because of higher interest rates and the impact on liquidity. But I think we are likely to see a continuation of more development activity in the DCM in the next 12 months or so.

Q: Regulators across the Middle East are gradually introducing new rules related to virtual assets. What is the status of discussions in Saudi Arabia relating to virtual and tokenised assets?

A: In recent months, the CMA has had several discussions with other regulators in Saudi Arabia to ensure that we distribute the authority of who regulates what in the world of digital assets, which is a critical piece to get right. Once this has been agreed, each entity can start regulating in its own right, and begin to allow and encourage activity in their own domain, according to their own strategy.

For us in capital markets, digital assets that look and feel like securities have become our domain, and we’ve already started regulating and allowing such activities. Under our Fintech Experimental Permit scheme, we’ve had the first crowdfunding platform that issues debt securities via distributed ledger technology, meaning they’re effectively tokenised.

Only last year, we started to accept proposals for other tokenised assets, leaving it to businesses to decide what kind of proposals and what kind of businesses they think they can tokenise. Of the 17 businesses that have applied to us in the past year since, roughly 20% are related to tokenisation. So, this gives us an indication of the momentum that this type of business is building.


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