How could the Saudi Capital Market get improved by Joining International Organizations

Improvement of Saudi Arabian Capital Markets

Role of International Financial Organizations

By

Zeyad H . Alhazmi

University of Manchester

2006 /2007

Improvement of Saudi Arabian Capital Markets

Role of International Financial Organizations

Abstract

As at the beginning of the year 2005 the Saudi Stock Market was witnessing a remarkable growth due to factors like high oil prices which contributed to the surge in the Saudi Economy . Apart from the increase in Oil prices there were other factors like the positive role played by the Saudi Capital Market Authority

(CMA , liberalization of licences to trade in the Saudi Stock Market , surplus budget for the year 2005 , other positive economic factors like growth in GDP and per capita income political stability of the country , larger money supply due to2 oil price hike , full pledged privatization programmes undertaken by the Saudi government , high tech trading system introduced in the Stock Exchange that facilitated faster clearing and settlement system and higher investor confidence are some of the other factors which resulted in a phenomenal growth of the Saudi Sock Market . With the privatization move of the government there were a large number of companies that have resorted to Initial Public Offerings for raising capital for their setting up and expansion needs . However there is still one thing lacking in the Capital Market of Saudi Arabia that is the internalization of the securities market . Actually Saudi Capital Market should be able to do much better . The lack of expertise and knowledge about the operations of the stock exchanges all over the world is oen of the reasons for the slower development of the Saudi Capital Market . The International financial organizations have a very positive and major role in shaping the growth of the Saudi Capital Market and the resultant improvements in the capital markets would be phenomenal . This studies the role of the International Financial Organisations in the improvement of the Saudi Capital Market

Improvement of Saudi Arabian Capital Markets

Role of International Financial Organizations

Table of Contents

Abstract 2

Table of Contents 3

List of Tables 5

1 .0 Introduction 6

1 .1 What is A Capital Market ? 7

1 .2 Economic Functions of the Capital Markets 8

1 .3 Stock Markets 9

1 .4 Other Financial Markets 9

1 .5 Kingdom of Saudi Arabia- Background 10

2 .0 Saudi Arabian Capital Market- Current Scenario 10

2 .1 Duties and Responsibilities of Capital Markets Authority 11

2 .2 Functioning of the Capital Markets Authority 12

2 .3 Tadawul - Saudi Arabian Stock Exchange 13

2 .4 Saudi Arabian Monetary Agency (SAMA ) 14

2 .5 Saudi Foreign Investment Law 15

3 .0 Saudi Equity Market Growth 17

3 .1 Current Status of the Saudi Stock Market 18

3 .2 Growth of the Saudi Stock Market - Whether Sustainable ? 19

3 .2 .1 Role of Capital Market Authority 20

3 .2 .2 Liberalization of Licenses to Trade 20

3 .2 .3 Increase in Oil Prices 20

3 .2 .4 Budget for the year 2005 21

3 .2 .5...