The Saudi Capital Market

Abstract

The role of capital markets in economic development has increasingly been emphasized as an important tool of financial intermediation. Saudi Arabia has been endowed with enormous wealth, gained in a short period of time. An efficient capital market structure could help in recycling capital surpluses, especially those held by the private sector. There is no doubt that Saudi Arabia possesses such capital surplus. We can take the examples of the Sahara Petrochemical Company and Ettihad Etisalat’s Initial Public Offerings (IPO’s) during 2004. The SR 300 million ($80 million) IPO offered six million shares at a par value of SR 50 per share. It was over-subscribed by 125 times and raised a staggering, world-breaking sum of SR 37.5 billion ($10 billion) (Arab News, 5 June 2004). Apparently, 552,000 individuals subscribed to the shares. This was followed, in the same year, by the 1 billion Saudi Riyal issue for the Ettihad Etisalat IPO, with 4.2 million applications and raising a world record of SR 51 billion (Hanware, 1 November 2004).