Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.
The Ultimate Guide to
The Saudi Arabian Financial Market
2019 is set to be a significant year for the Saudi Arabian financial market, not least of which was the recent announcements that the Saudi Stock Exchange, also known as Tadawul, is to be promoted to ‘emerging market’ status by the FTSE Russell and MSCI.
The main stock index for the Saudi Stock Exchange is the Tadawul All-Share Index or simply the TASI. This capitalisation-weighted headline index is currently made up of the stocks of 184 companies listed on the Tadawul. In addition to its equity listings, Tadawul also offers Islamic products like sukuk, which are Islamic financial certificates similar to bonds.
Forex traders may recognise the Saudi riyal (SAR) as Saudi Arabia’s national currency, although the SAR is not a common reserve currency among central banks, according to the International Monetary Fund (IMF). The Saudi riyal has also been pegged against the U.S. dollar at a rate of one U.S. dollar to 3.75 riyals since 1986, with only minor fluctuations around that rate typically seen.
The riyal was ranked 27th by the Bank for International Settlements (BIS) among the most actively traded currencies in 2016, making up around 0.3 percent of the overall forex market’s daily turnover that rose considerably from its 0.1 percent market share in 2013.
Trade factors that influence the Saudi financial markets include the price of key strategic commodities exported by the country, like mineral fuels (including oil) that amounted to 77.4% of its exports in 2017. As the world’s 27th largest export economy, Saudi Arabia’s exports accounted for roughly 35.6% of Saudi Gross Domestic Product (GDP) in 2016. This means the kingdom is quite dependent on exports, especially to its major trading partners of China, Japan, India, the United States and South Korea.
Financial regulation in Saudi Arabia for banking, insurance and financial sector, including online forex and contract for difference (CFD) brokers, falls under the auspices of theSaudi Arabia Monetary Authority (SAMA), which is the Saudi central bank. Furthermore, theCapital Market Authority (CMA) is responsible for regulatory policy development in Saudi Arabia and supervises Tadawul.
Trading in Saudi Arabia
When looking for an online broker to trade forex or CFDs with, make sure to choose a well-regulated broker that has a strong reputation with clients, since they should be suitable for entrusting a margin deposit with them.
Online brokers generally offer several trading account for traders, including:
Forex Trading:Exchanging one currency for another forms the basis of forex trading. Exchange rates fluctuate as one currency rises or falls relative to another in particular currency pair. The popularity of forex trading has expanded greatly once online trading became possible. The forex market is the most liquid and largest financial market globally and had a daily turnover of $5.1 trillion/day in April 2016, according to data compiled by the BIS.
CFD Trading:Making transactions in derivative financial instruments known as contracts for difference (CFDs) allows traders to speculate on the future of their underlying assets. Such assets can consist of a currency pair, commodity, stock, stock index or other financial instruments.
Demo accounts: Funded with virtual money, these accounts can be used to practice trading, test a strategy or check out a broker’s services and platform. Find out more on opening demo accounts here.
Islamic accounts: These are suitable for traders who wish to trade in an account that conforms to Sharia law. Find out more on trading with an Islamic account.
With respect to trading stocks, the Saudi Stock Exchange provides fair and transparent trade execution in Saudi Arabian stocks, mutual funds, exchange-traded funds (ETFs), and sukuk (Islamic bonds).Tadawul has used NASDAQ’s highly regarded X-Stream INET trading platform for transactions since 2015.
Exchange transactions are largely executed in Saudi riyals that are pegged to the U.S. dollar. Securities traded on the Saudi exchange areexecuted via order matching based first on price and then on the time entered through brokers acting on behalf of clients or themselves.
Opportunities of Trading in Saudi Arabia
Saudi Arabia has a strongly oil based economy over which the Saudi Arabian Government exercises considerable control. One item of note is that the Saudi government has launched an ambitious socio-economic plan to shift the Saudi economy away from oil products known as Vision 2030. This plan aims to increase growth in the private sector and offers opportunities in various areas including:
Developing Saudi Arabia’s capital markets
Providing affordable housing to citizens
Building a renewable energy sector
Attracting greater foreign direct investment
Privatising numerous government entities
Expanding the information and communication technologies (ICT) sector
Developing the mining sector further
Increasing development of the railway and public transportation services
Growing a domestic tourism infrastructure
Increasing petrochemical and natural gas production
Although foreign investment in some areas is not permitted, non-Saudi participation in joint ventures is allowed up to 60%, according to the World Trade Organisation (WTO). The WTO also noted that trade tariffs generally remain low, and there are no sales or salary taxes, although a 5% Value Added Tax was introduced in 2018. Also, certain agricultural imports have special requirements. For example, imported meats require Halal and Islamic slaughter certification.
Saudi Arabia’s financial services sector specialises in providing Islamic investment products and accounts, and the country was ranked 7th for protecting minority investors by theWorld Bank. The Saudi riyal’s exceptionally stable exchange rate also makes trading with the country easier for U.S. businesses.
Challenges of Trading in Saudi Arabia
Furthermore, as a consistent net exporter with a high trade-to-GDP ratio, Saudi Arabia remains vulnerable to trade issues and economic weakness among its key trading partners. The kingdom has also been involved in anArab embargo against neighbouring Qatar for allegedly having friendly ties with Iran and supporting terrorist activities. Qatar subsequently said it would leave the OPEC oil cartel in a move possibly related to that embargo.
Furthermore, although they do not directly affect Saudi imports, the imposition of trade tariffs and the resulting trade war between the United States and China threatens a likely negative impact on the country in the long term. This is due to concerns that China’s oil imports from Saudi Arabia may fall due to diminishing industrial activity and reduced demand for oil by China due to the trade war.
When it comes to starting a business, the World Bank ranked Saudi Arabia a very poor 141st compared to other countries. Saudi also ranked a rather dismal 92nd for overall ease of doing business, and 112th for obtaining credit. This indicates a quite unfavourable environment for doing business or starting one up, as well as a significant challenge in obtaining local financing.
Summary
Overall, many traders and businesses will find Saudi Arabia a rather challenging country to operate in, although some opportunities do exist due to its government’s economic diversification plan.
Also, those interested in Islamic accounts and financial products will find this country offers a wide choice of Sharia law compliant options, although not every account at local financial institutions complies fully.
When searching for a broker to trade forex and/or CFDs through in Saudi Arabia, traders should check to see that any firm under consideration offers a suitable range of asset classes, a decent trading platform, strong regulation and adequate financial security for a margin deposit.
Why Choose ThinkMarkets For Saudi Arabia?
ThinkMarkets scored best in our review of the top brokers for saudi arabia, which takes into account 120+ factors across eight categories. Here are some areas where ThinkMarkets scored highly in:
8+ years in business
Offers 50+ instruments
A range of platform inc. MT4, Mac, Web Trader, Tablet & Mobile apps
24/7 customer service
Tight spreads from 0.10pips
Used by 0+ traders.
Offers demo account
2 languages
ThinkMarkets offers two ways to tradeForex, CFDs.
If you wanted to trade EURUSD
The two most important categories in our rating system are the cost of trading and the
broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.
ThinkMarkets have a B
trust score, which is good. This is largely down to them being regulated by Financial Conduct Authority and ASIC, segregating client funds, being
segregating client funds, being established for over 8
Want to see how ThinkMarkets? We’ve compared their spreads, features, and key information below.
Spread & fee comparsion
The spreads below are illustrative. For more accurate pricing information, click on the names of the brokers at the top of the table to open their websites in a new tab.
