Saudi CMA boosts governance rules, VAT hike drives market liquidity: El-Kuwaiz

Saudi Arabia’s Capital Market Authority (CMA) worked on boosting legislations, in line with its efforts to increase the number of disclosures, Mohammed El-Kuwaiz, Chairman of the market regulator, said in a webinar held by Bloomberg.  

The CMA has also started to take stricter actions to clamp on market violations.  

The market witnessed a strong recovery in terms of trading volumes and values in the second half of the year, when the daily trading value neared $1 billion compared to almost $3-4 billion now.

The tripled value-added tax (VAT) hike was one of the reasons behind strong trading, as it redirected liquidity from certain investments, such as real estate, to the capital market. 

Meanwhile, the market regulator eased foreign investor access to the Saudi market by introducing new products, such as REITs, ETFs and derivatives.  

El-Kuwaiz pointed out that the COVID-19 pandemic was a true test of the CMA’s reforms over the last few years. “For instance, the COVID-19 pandemic was a market shock that allowed us to test the impact of foreign flows on market stability,” El-Kuwaiz said, concluding that these investments played a role in the capital market stability and diversification. 

The recent reforms led the capital market to play a bigger role in finance, which was evident during the crisis.