The Saudi Exchange, widely known as Tadawul, is the stock market of Saudi Arabia and one of the largest in the Middle East by value. It lists banks, petrochemical and energy companies, telecoms, retailers and, since a wave of initial public offerings, many new companies. The Capital Market Authority (CMA) regulates the market. Shares are priced in Saudi riyal (SAR), and the main index is the TASI.
This guide explains how a person buys Saudi shares, what makes the market different, and what a foreign investor should confirm first. It is general information, not advice on any share. Rules on foreign access, trading days and costs change, so confirm the current position with an authorised broker.
How the market is organised
Tadawul has a main market for larger companies and a separate parallel market called Nomu for smaller companies, which has lighter listing requirements and is open to a narrower set of investors. Check which market a share belongs to before you buy, because the risks differ a great deal.
Share ownership is recorded electronically at the Securities Depository Center, known as Edaa, and trades are cleared and settled through the exchange's clearing house. You will not hold paper certificates.
Saudi Arabia's market trading week and holidays follow local practice and have differed from those of Western markets, so check the exchange calendar before you plan a trade. Our guide to exchange holidays and trading days explains how to find them.
Step 1: choose an authorised broker
Individuals trade through brokers that are authorised by the CMA. These are commonly the brokerage arms of Saudi banks and investment companies. Compare:
- Authorisation. Check the CMA's register of authorised firms.
- Costs. Commission is a percentage of the order with a minimum. Banks may add account fees.
- Language and tools. Most firms offer Arabic and English platforms. Confirm that contracts and statements are available in a language you read.
- Client money. Ask how your cash and shares are held and protected.
Step 2: foreign investors and access
Foreign access to the Saudi market has widened in stages over the last decade, first through a qualified foreign investor framework and then through more open arrangements. The conditions, ownership limits and the documents needed have changed over time. Do not assume that what was true a few years ago still applies. Ask the broker, or a custodian that serves foreign investors, which route is available to you and what it requires. Our guide to foreign investor rules lists the questions.
Residents of other Gulf states may have different arrangements from investors elsewhere, so state your country of residence when you ask.
Step 3: place an order
Orders are entered through the broker's platform. Use a limit order for shares that do not trade much. The exchange applies daily price limits, so a share cannot move without limit in one session, which can prevent you from selling at once after bad news.
Follow live and end-of-day prices, gainers and losers on Saudi stocks.
The riyal and currency risk
The Saudi riyal is pegged to the US dollar at a fixed rate. For a dollar-based investor this removes most of the usual currency risk, because the share's return in riyal is about the same as its return in dollars. The peg is a policy choice, and a change to it would be a risk, but it has held for many years. Investors with other home currencies still face the exchange rate between their currency and the dollar. See currency risk for foreign stocks.
What is distinctive about the market
- Oil and energy. The economy and many large companies depend on energy prices, so the index often reacts to oil prices and to government spending.
- Large state-linked companies. A few very large companies account for a big share of the main index.
- Many recent listings. Newly listed companies have short track records, so read the prospectus and the first reports carefully.
- Retail participation. Individual investors do a large share of the trading, which can make prices move quickly on news.
- Index classification. Index providers have moved the market toward emerging-market status, which has attracted international fund money. See emerging vs developed markets.
Costs and tax
Expect brokerage commission, exchange and depository fees and, where it applies, taxes on certain payments to non-residents. Saudi Arabia's tax treatment of dividends and gains differs between residents, citizens of Gulf states and other foreigners, and has been revised before. Ask a qualified adviser about your own position. See tax on foreign stock gains.
A worked example
You buy 1,000 shares at 30 riyal, an order of 30,000. With total costs of 0.25 percent, about 75, you pay 30,075. If the price reaches 33.5, your shares are worth 33,500, a gain of 3,425 before selling costs. If it falls to 27, they are worth 27,000, a loss of 3,075 including the cost of buying. These numbers are an illustration, not a forecast.
Checklist before you invest
- Confirm the broker is CMA-authorised.
- Ask what route and documents apply to a foreign investor today.
- Find out whether the share trades on the main market or on Nomu.
- Use a limit order for thin shares and check the daily price limit.
- Read the latest report, or the prospectus for a recent listing.
- Ask an adviser how dividends and gains are taxed for you.
This guide is for general information, not financial advice. See the disclaimer.