https://arab.news/crngq
RIYADH: Saudi Arabia’s economic diversification strategy is transforming local capital markets and driving regional growth, positioning the Gulf Cooperation Council as an emerging financial hub, according to a Moody’s report.
The Kingdom’s ambitious Vision 2030 plan is reshaping the nation’s financial landscape, with capital markets crucial for funding large-scale investment projects and attracting global investors.
The study further stated that sovereign wealth funds will act as “catalysts for capital market development and put the region on the global investment map.”
The expansion of Gulf capital markets is being driven by economic diversification and structural reforms.
Vision 2030 has accelerated investment in key non-oil sectors, creating new opportunities fueling market growth.
Moody’s analysis aligns with recent reports that highlight the significant growth of Saudi Arabia’s capital market.
Over the past five years, the Kingdom raised $274 billion, with $130 billion from US dollar-denominated issuances and $144 billion locally in Saudi riyals.
Moreover, the Saudi Exchange experienced a 40 percent liquidity increase in 2024 compared to 2023.
Foreign participation is considered essential for this transformation, and “debt capital markets have significant room for expansion,” the report stated.
Regulatory reforms are expected to further boost international equity investment by easing foreign ownership rules and new offering requirements, attracting both passive and active inflows and encouraging greater private sector participation.
These regulatory and operational enhancements have already led to the inclusion of the Saudi equity market in global indices, boosting liquidity and institutional investment, with further growth expected from increased initial public offerings, the study stated.
Private credit markets are also expected to grow as investor appetite for alternative investments rises.
Given the significant funding needs associated with economic transformation, alternative investments will gain traction.
Moody’s believes that these include regional and global private credit funds, direct lending, and structured finance solutions.
Private credit is also emerging as a viable alternative for small and medium-sized enterprises, making this option a viable alternative for this underserved segment, as banks have historically been cautious in lending to SMEs.
Despite strong growth prospects, challenges remain, the report highlighted, adding: “Regulatory and legal complexities, together with a limited track record in some asset classes may impede long-term growth.”
Additionally, the region’s dependence on hydrocarbon exports and exposure to geopolitical risks could impact market stability and investor sentiment.
Sovereign wealth funds will continue to play a major role in shaping regional capital markets, as they provide liquidity, enhance market depth, and anchor foreign investor confidence.
“Saudi Arabia’s Public Investment Fund has been central to the Kingdom’s economic diversification strategy by directing investments into key non-oil sectors and planning major IPOs, raising the profile of the Saudi stock market,” the report added.