How to enter the Saudi stock market
The Saudi stock market, Tadawul, is among the largest financial markets in the Middle East and North Africa, with respect to both the level of liquidity and market capitalization. This wide market offers many diversified investment opportunities to its investors in a way that facilitates the short and long term investment process in all financial products such as stocks, bonds and investment funds of all kinds. It doesn’t just stop there, in 2018, Saudi Arabia received 13 billion Saudi riyals in foreign direct investment. According to reports, the government is interested in attracting more important foreign investments in many emerging sectors that include health, infrastructure, logistics, education, clean energy, mining, defense, entertainment and tourism. given each These facts, a trading platform is among the best, most prosperous and professional investment destinations in the world, so how do I enter the Saudi stock market?
Before answering the question of how to enter the Saudi stock market, let us first learn about the various things that you must take into account and do in order to make sure that you start your journey in the Saudi stock market in the right way.
5 things before entering the Saudi stock market
Draw your financial roadmap
Before making any investment decision, sit down and take an honest look at your entire financial situation especially if you have never made a financial plan before. The first step towards successful investing is defining your financial goals and risk tolerance – either on your own or with the help of a financial professional. There is no guarantee that you will make money from your investments by drawing this financial map, but getting some facts about saving and investing can help you get the financial security you desire over the years and enjoy the benefits of managing your money.
Assess your risk tolerance level
All investments involve some degree of risk. If you intend to enter the Saudi stock market, it is important to understand before you invest that you may lose some or all of your money. Unlike deposits in insured banks, the money you invest in securities is usually not strictly insured due to the level of volatility in the market. So you may sometimes face the risk of losing the amount of money you have invested.
This does not mean that you will lose your money by investing in stocks, but it does mean that you should be careful.
The reward for taking more risk is the potential for a greater return on investment. If you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in higher-risk asset classes, such as stocks or bonds, rather than limiting your investments to lower-risk assets, such as cash equivalents. On the other hand, investing in cash-only investments may be appropriate for short-term financial goals. The main concern for individuals who invest in cash equivalents is inflation risk, which is the risk that inflation rates will grow and returns will erode over time.
Take care of the principle of diversification
By adhering to the principle of diversification and including a variety of asset classes with investment returns that move up and down under different market conditions within the portfolio, the investor can protect himself from large losses. Historically, never before have the yields of the three major asset classes — stocks, bonds, and cash — moved up and down at the same time. Market conditions that cause one asset class to perform well often cause another asset class to have average or poor returns. By investing in more than one asset class, you will reduce the risk of losing money and the overall investment returns for your portfolio will be smoother. If the return on investment of an asset class declines, you will be in a position to buffer your losses in that class Those assets with better investment returns in another asset class.
In addition to this, the principle of diversification and asset allocation is important because it has a significant impact on whether you will achieve your financial goal. If you do not take sufficient levels of risk in your portfolio, your investment may not yield a large enough return to meet your goal. For example, if you’re saving for a long-term goal, like retirement, most financial experts will agree that you’ll likely need to include at least some stocks or mutual funds in your portfolio.
Choose your investment strategies carefully
Choosing the appropriate investment strategies is an important factor in your success in achieving your investment goal, and the dollar cost average strategy is one of the most effective strategies in the world of investment. With an investment strategy known as dollar cost averaging, you can protect yourself from the risk of investing all your money at the wrong time by following a consistent pattern of adding new money to your investment over a long period of time. By making regular investments with the same amount of money each time, you will be able to buy more investments in time.
Get an emergency fund
Most savvy investors put enough money into a savings product to cover emergencies they might encounter, such as sudden unemployment. Some of them may make sure that they have savings that can cover their needs for six months so that they can be sure that it will be available to them exactly when they need it.
Now that we know the most important things that you should consider before investing, let’s move on to find out the answer to the question of how to enter the Saudi stock market.
How do I enter the Saudi stock market?
How do I enter the Saudi stock market if I am a Saudi or a resident or a citizen of the Gulf countries?
According to what was mentioned on the official website of the Tadawul Stock Exchange and according to the conditions and restrictions stipulated in the Securities Depository Center rules, any of the following investors can enter the Saudi stock market:
Persons of natural character – individuals.
Joint-stock and limited liability companies.
authorized persons.
Charitable and social institutions and associations.
Endowments.
Licensed investment funds.
Public institutions and government funds.
Any other person permitted by the Capital Market Law and its implementing regulations to enter the Saudi stock market.
The Saudi Depositary System specifies for this category of investors even the types of documents and papers that they must present in order to enter the Saudi stock market. which is next:
Natural persons – individuals:
A copy of the national ID or family card for Saudis and citizens of the Cooperation Council for the Arab States of the Gulf.
A copy of each of the valid residence permit and passport for non-nationals of the Cooperation Council for the Arab States of the Gulf.
Joint stock and limited liability companies:
A copy of the companies commercial register.
A copy of the articles of association or articles of incorporation of the company and its appendices, and any amendment thereto.
A copy of the Board of Directors’ decision approving the opening of the investment portfolio and granting powers to the authorized signatory.
Copies of the identities of the members of the board of directors of the listed joint stock company.
Authorized persons:
Copies of the commercial register and license and a copy of the work practice letter for the authorized persons.
Charitable and social institutions and associations:
​Copies of the license and articles of association for charitable and social associations and institutions.
A copy of the investment approval decision from the relevant government agency.
A copy of the decision issued by the association or charitable organization naming the person authorized to manage the investment portfolio and the cash account.
A copy of the approval letter issued by the Authority for charitable and social associations and institutions.
Endowments:
A copy of the endowment deed and the trustee’s deed.
A copy of the identity of the waqf superintendent.
Licensed investment funds:
A copy of the license issued to establish the investment fund.
A letter from the fund manager in the name of the person authorized to manage the fund’s investment portfolio.
A copy of the identity of the person authorized to manage the investment portfolio of the fund.
Public institutions and government funds:
A copy of the articles of association of the public institution or government fund.
A copy of the decision issued by the public institution or government fund naming the person authorized to manage his investment portfolio.
A copy of the national identity for Saudis and citizens of the Gulf Cooperation Council countries, or a copy of the residence permit and passport for non-nationals of the Gulf Cooperation Council countries authorized to manage the investment portfolio and the cash account of the public institution or government fund.
A copy of the approval letter issued by the Authority to the public institution or government fund.
For the source of this data: saudiexchange
How do I enter the Saudi stock market for qualified foreigners?
Qualified foreigners, according to the controls set by the Depository Center Laws, are often allowed to invest in the Nomu Parallel Market. The Nomou Saudi Stock Market offers many features to qualified foreign investors. These characteristics include:
A market with more flexible standards and requirements
Investing in Nomu – Parallel Market is only for qualified investors
The possibility of moving to the main market after obtaining approvals from the regulatory authorities
There are some major differences between the main Saudi stock market and the parallel Nomu market. The main website of the Saudi Stock Exchange was presented by summarizing it in an illustrative table. It is as follows:
The Ghaida system has also separated the types of qualified investors who are allowed to enter the parallel Saudi Nomu stock market. It is as follows:
Financial market institutions acting for their own account.
Clients of a financial market institution authorized to engage in management business, provided that the financial market institution has been appointed with conditions that enable it to take decisions regarding accepting participation in the offering and investing in the parallel market on behalf of the client without the need to obtain his prior approval.
The government of the Kingdom, or any government agency, or any international body recognized by the Authority, or the market, and any other financial market recognized by the Authority, or the depository center
Companies owned by the government, directly or through a portfolio managed by a financial market institution authorized to engage in management business.
Companies and funds established in the countries of the Cooperation Council for the Arab States of the Gulf.
Investment funds
Non-resident foreigners who are allowed to invest in the parallel market and who meet the requirements stipulated in the guideline for investing non-resident foreigners in the parallel market.
Qualified foreign financial institutions
Any other legal persons who may open an investment account in the Kingdom and an account with the Depositary Center.
Natural persons who may open an investment account in the Kingdom and an account with the Depository Center, and who meet any of the following criteria:
That he has made transactions in the securities markets, the total value of which is not less than forty million Saudi riyals, and not less than ten transactions in each quarter during the past twelve months.
The value of his net assets should not be less than five million Saudi riyals.
Work or have worked for at least three years in the financial sector.
To have obtained the General Certificate of Dealing in Securities approved by the Authority.
To have a professional certificate specialized in the field of securities business accredited by an internationally recognized body.
Any other persons specified by the Authority.
To view the official page of the Saudi Stock Exchange, from which these were taken: saudiexchange
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