Saudi Arabia’s asset management industry is experiencing remarkable growth, reaching over 25 percent of the country’s GDP. The achievement is due to the government’s efforts to create a conducive environment for financial expansion. This development is outlined in KPMG‘s latest Asset Management Review 2023 report. The publication analyzes the industry’s performance and regulatory changes while providing insights into the kingdom’s future in asset management.
Government initiatives and Vision 2030
As Ovais Shahab, head of Financial Services at KPMG in Saudi Arabia, noted, the government is playing a pivotal role in fostering a favorable environment for the asset management industry. Saudi Arabia’s ambitious Vision 2030, which aims to diversify its non-oil economy, has propelled significant investments in projects. As a result, the financing requirements are rising, creating abundant investment opportunities.
Saudi’s Financial Sector Development Program (FSDP) has been tailored to align with global standards. This further promotes the growth of the asset management sector. Thus, these government initiatives have provided a robust foundation for the industry’s rapid expansion.
Market growth and performance
The Capital Market Authority’s quarterly Statistical Bulletin for June 30, 2023 revealed significant growth in the number of investment funds. They surged by 35.7 percent year-on-year, from 839 to 1,130. The number of public and private investment fund subscribers also saw a substantial increase, rising from 675,465 to 901,896. This represents a 33.5 percent year-on-year surge. During this period, the size of assets under management reached SAR823 billion, compared to SAR756 billion on June 30, 2022.
Moreover, the industry reported a rise in net income to SR3.3 billion during the six-month period ending on June 30, 2023. This is in comparison with SR6.1 billion for the entire financial year ending December 31, 2022.
Higher interest rate environments and market volatility caused by global recession fears are major factors in this shift. Investors are opting for low-risk assets with stable returns, influencing this change in market dynamics.
Moreover, Saudi Arabia’s stock market, Tadawul, is making its presence felt on the global stage. It ranks as the world’s tenth-largest stock exchange in terms of market capitalization and the largest in the GCC region. This signifies the strength and appeal of the Saudi financial markets.
Tax and Zakat landscape changes
Furthermore, the Asset Management Review 2023 report highlights important developments in the tax and Zakat landscape. The Ministry of Finance approved new Zakat rules for investment funds, which came into effect on January 1, 2023. Although investment funds are not subject to Zakat, they are required to register with the Zakat, Tax, and Customs Authority (ZATCA). Additionally, they must submit an information declaration within 120 days.
Saudi Arabia is also strengthening its position on the global stage in terms of capital market competitiveness. According to the International Competitiveness Yearbook for 2022, Saudi Arabia achieved advanced rankings in various indicators for the capital market. Nine indicators out of twelve associated with capital markets witnessed improvement. Factors such as training and education, regulatory framework, and adaptive attitudes showed significant progress.
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