A wave of optimism is sweeping through Saudi Arabia’s investment community, signaling a positive outlook for the Kingdom’s financial markets. According to the 2024 Kingdom of Saudi Arabia Investor Pulse Survey by Edelman Smithfield, an impressive 90 percent of investors in the Kingdom anticipate a boom in the global initial public offering (IPO) market within the next year.
Despite over 50 percent of investors citing market volatility and inflation as key challenges, investors in Saudi Arabia have demonstrated remarkable resilience and a renewed appetite for growth opportunities. The survey reveals that 20 percent of investors participated in IPOs over the past year and 15 percent engaged in IPO roadshows.
“The prevailing anticipation for the market’s boom signifies a promising period for both investors and companies contemplating public offerings. For issuers, this is a pivotal moment to harness investor sentiment by prioritizing transparency and effective communication amidst a complex economic landscape,” said Suhaib Alwazir, Head of Edelman Smithfield KSA.
Real estate and technology lead interest
This investor optimism reflects more than a rebound from economic challenges; it signifies an evolving financial landscape that is full of potential. Investors are gearing up to seize the opportunities the IPO market has to offer. Nearly 60 percent of investors are now more inclined to consider future IPOs as viable investment opportunities compared to their engagement levels in 2022 and 2023.
The survey highlights significant investor interest across various industries in Saudi Arabia. Real estate tops the list, attracting 35 percent of investors which reflects confidence in the Kingdom’s ambitious infrastructure and urban development projects. Meanwhile, the technology and energy sectors are equally compelling, each drawing 29 percent of investor interest.
Additionally, 23 percent of investors favor the healthcare sector, underscoring the growing emphasis on medical advancements and public health.
Importance of communication and governance
Effective communication emerged as a crucial factor in investment decisions, with over half of the investors emphasizing its importance during IPO processes. This underscores the need for companies to engage transparently with potential investors, providing clear insights into their operations and growth strategies.
Moreover, strong corporate governance remains a priority. A significant 79 percent of investors stressed the necessity of profitability for IPO investments, highlighting a focus on business fundamentals in new market entries. In addition, 83 percent of investors value cybersecurity expertise within the board of directors, reflecting a growing emphasis on digital security and risk management in corporate governance.
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Challenges persist
While enthusiasm is high, investors in Saudi Arabia remain aware of potential hurdles. Over half of the surveyed investors acknowledged market volatility and inflation as key challenges, demonstrating a realistic appraisal of the global economic climate.
However, the Kingdom’s robust performance amid a slower global economy in 2023 positions it well to navigate these concerns. Saudi Arabia has significantly contributed to regional growth and maintained a strong IPO market, showcasing its ability to thrive despite external pressures.
The survey’s findings also indicate that investors in Saudi Arabia are optimistic and preparing to increase their market participation. More than half of investors are inclined to consider future IPOs more viable than in previous years, signaling a readiness to actively contribute to and benefit from the Kingdom’s economic ascent.
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