Tadawul Group Eyes More M&A To Boost Capital Markets

Saudi Tadawul Group said it’s targeting more mergers and acquisitions as it looks to further develop the local capital market and draw in foreign investors.

The owner of the Saudi stock exchange sees its next opportunities in the data and analytics space after recently closing a deal with Saudi-based Direct Financial Network, according to Lee Hodgkinson, Tadawul’s chief strategy officer.

“We would expect M&As to form a bigger role in our future than it has done in our past,” he said in an interview on the sidelines of the Capital Markets Forum in Riyadh.

More exchange-traded funds tracking shares of Saudi Arabian companies are also expected. Tadawul is already involved in almost a dozen ETFs globally and is seeing heavy interest from investors in China, according to Hodgkinson.

“ETFs will be a strong driver of growth in the kingdom. There is still a lot of investors that we can tap into,” he said.

Saudi Arabia has placed top priority on developing a more robust financial sector as it seeks to stimulate non-oil growth and investment from abroad. A flurry of initial public offerings, including 15 on the main exchange last year, is helping to deepen options for investors in the equity market.

Recently, Tadawul also unveiled a fresh framework to boost liquidity in fixed-income trading and said it will continue working to ease access for foreign investors.

“We are seeing a changing perception toward Saudi Arabia for not just being a hydrocarbon economy but by being a full-service economy across a number of sectors,” Hodgkinson said.

On the equities side, total average daily traded value rose to about $2bn last year, according to Tadawul data. Foreigners outside of Gulf nations including the United Arab Emirates and Qatar accounted for almost a third of activity as of the end of 2024, triple what it was in 2020.

Analysts have said a broader mix of IPOs are boosting Saudi Arabia’s appeal. A number of exchange traded funds tracking Saudi stocks in foreign markets have been launched since late 2023.

State Street Corp recently started the first ETF tracking Saudi bonds in Europe and has said it plans to introduce more offerings to give investors greater access to the local debt market.