SUMMARY:
TASI's Performance in 2024: The Saudi stock market, represented by TASI, had a mixed year. It grew in the first quarter, dropped in the second quarter, but recovered in the third quarter, ending the year with a small decline of 0.25%.
Sector Highlights: The energy and materials sectors did well due to rising oil prices and government projects. However, the financial and healthcare sectors faced difficulties due to higher costs and interest rates.
Looking Ahead: Even though there were challenges, Saudi Arabia's stock market is expected to grow in 2025, supported by economic reforms and efforts to expand beyond oil.
The Saudi Arabian stock market, represented by the Tadawul All Share Index (TASI), has been a focal point for investors, both regionally and globally, throughout 2024. This article delves into the market's performance, sector-specific developments, and global influences that shaped the trading landscape. The analysis also considers key economic indicators, investor sentiment, and the overall outlook for the Saudi stock market moving into 2025.
TASI's Performance: A Year of Fluctuations
The Tadawul All Share Index (TASI), a major benchmark for Saudi Arabia's stock market, began 2024 with optimism but experienced notable fluctuations. As of December 26, 2024, the index stood at 11,859.47 points, showing a minor year-to-date decline of 0.25%. However, despite this decline, the index exhibited positive movements in specific periods throughout the year, with certain sectors outperforming others.
First Quarter: A Positive Start
The first quarter of 2024 was marked by strong growth, particularly in January and February, as TASI surged by 3.6%. Investors were buoyed by an uptick in global oil prices, a major contributor to Saudi Arabia's economy, and the anticipation of strong earnings reports from key sectors. The energy and materials sectors, in particular, led the charge, with the demand for oil and raw materials continuing to rise.
This upward trajectory was supported by a combination of positive domestic economic indicators and global factors. Saudi Arabia’s continued push to diversify its economy, especially in the non-oil sectors, was also a key driver of investor confidence. Economic reforms, including investments in infrastructure and tourism, aligned with the Vision 2030 initiative, played an instrumental role in shaping the market sentiment.
Second Quarter: A Period of Decline
Following a promising start, the second quarter of 2024 saw TASI face a downturn. The index lost 5.8% during this period, which marked a significant correction after the initial gains. The decline was primarily attributed to global economic challenges, including concerns over interest rate hikes by major central banks, particularly the U.S. Federal Reserve.
Oil prices, which had been climbing earlier in the year, started to experience volatility in Q2, contributing to uncertainty among investors. The impact of these global economic shifts reverberated throughout the Saudi market, leading to a decrease in investor confidence.
Furthermore, sector-specific weaknesses became more evident in Q2. While the energy sector showed some resilience, the financial and healthcare sectors faced challenges. Rising inflation, both locally and globally, further dampened market sentiment, as higher costs for goods and services started to erode profitability across various sectors.
Third Quarter: Stabilization and Recovery
The third quarter of 2024 marked a period of stabilization for TASI. After the sharp declines in Q2, the market showed signs of recovery in July and August, driven by positive corporate earnings reports and easing global inflation concerns. By September, the index had regained some ground, rising by approximately 4.2% from the lows seen in Q2.
One of the main contributors to this recovery was the continued growth of the non-oil sectors. Saudi Arabia’s push to diversify its economy through investments in technology, tourism, and entertainment began to bear fruit, with companies in these sectors showing stronger-than-expected performances. The healthcare sector also saw some improvements, driven by increased demand for healthcare services and innovations in the sector.
Furthermore, the government’s continued focus on infrastructure projects, as well as its investments in the Public Investment Fund (PIF), helped boost investor optimism. These initiatives were in line with the broader economic goals outlined in the Kingdom’s Vision 2030, which seeks to reduce the country’s dependency on oil.
Fourth Quarter: Cautious Optimism Amid Global Uncertainties
As the year drew to a close, TASI entered the fourth quarter with cautious optimism. While the index showed a modest decline for the year-to-date period, there were several signs of recovery in the final quarter. The Saudi market benefited from the resilience of key sectors, particularly energy and materials, which rebounded following the global energy supply disruptions and rising oil prices.
However, investor sentiment remained cautious due to ongoing concerns about global economic conditions. The U.S. Federal Reserve’s decision to slow the pace of interest rate hikes provided some relief to markets, but the overall global economic uncertainty continued to weigh on investor confidence. Additionally, oil price fluctuations remained a persistent concern for investors, given the significant impact of oil revenues on Saudi Arabia’s economy.
As of November 2024, the Saudi Exchange's market capitalization stood at SAR 9.96 trillion (approximately USD 2.66 trillion), reflecting the substantial size and importance of the Saudi stock market in the region.
Sector Performance: Winners and Losers in 2024
Throughout the year, the performance of individual sectors within the Saudi stock market was highly varied. The following sectors were among the most noteworthy:
Energy and Materials
The energy sector, a cornerstone of the Saudi economy, showed resilience in 2024, particularly in the first and fourth quarters. As global oil prices rebounded during the year, energy stocks, particularly those tied to Saudi Aramco, saw gains. The materials sector, which includes mining and construction companies, also performed well, supported by government spending on infrastructure and development projects.
Financials
The financial sector faced significant challenges in 2024, particularly in the second quarter. Rising interest rates and inflation pressures impacted the profitability of banks and financial institutions. Despite this, certain banks with diversified portfolios managed to navigate the turbulent period more successfully.
Healthcare
The healthcare sector experienced mixed performance throughout the year. While some companies saw growth due to increased demand for healthcare services and pharmaceuticals, others struggled with rising costs and regulatory challenges. Nonetheless, the healthcare sector showed signs of recovery in the third quarter, buoyed by investments in healthcare infrastructure and advancements in medical technology.
Consumer Goods and Retail
The consumer goods and retail sectors faced headwinds in 2024, with rising inflation and economic uncertainty affecting consumer spending. However, Saudi Arabia’s growing middle class and the government’s push for tourism and entertainment developments provided some support to the retail sector.
Macroeconomic Influences: Global and Domestic Factors
Several macroeconomic factors had a significant impact on the performance of the Saudi stock market in 2024:
Oil Prices: Oil prices continued to be a major driver of the Saudi economy and stock market. After rising in early 2024, oil prices faced volatility throughout the year, leading to fluctuations in market performance. The global energy crisis, along with OPEC’s production decisions, played a central role in shaping investor sentiment.
Inflation: Both global and domestic inflationary pressures were felt throughout the year. In Saudi Arabia, inflation rose slightly in the second half of 2024, which affected consumer spending and profitability across various sectors.
Interest Rates: Global interest rate hikes, particularly by the U.S. Federal Reserve, influenced the Saudi market. As Saudi Arabia follows the Fed's policy closely, any adjustments to interest rates had a direct impact on liquidity and investor behavior.
Geopolitical Risks: Geopolitical tensions, particularly in the Middle East, also contributed to market uncertainty. Although Saudi Arabia remained relatively stable, external risks, including potential conflicts in neighboring regions, added an element of unpredictability.
Outlook for Saudi Arabia’s Stock Market in 2025
Looking forward to 2025, the outlook for the Saudi stock market is cautiously optimistic. The country’s ongoing economic diversification efforts, particularly in the non-oil sectors, are expected to continue driving growth. Key sectors such as technology, tourism, and healthcare are poised for expansion, and investments in infrastructure projects should support market performance.
However, global economic uncertainties, including oil price volatility, inflationary pressures, and geopolitical risks, may continue to pose challenges. As such, investors will need to remain vigilant and adaptable to the changing market landscape.
Conclusion
In conclusion, 2024 was a year of mixed performance for Saudi Arabia’s stock market. While TASI faced fluctuations, the underlying strength of key sectors, along with the government’s commitment to Vision 2030 reforms, provided a foundation for long-term growth. Despite the challenges posed by global economic conditions, Saudi Arabia’s stock market remains a critical player in the Middle East and an attractive destination for investors seeking opportunities in emerging markets.
