Vision and reality merge for GCC capital markets

For the past decade, the six Gulf Cooperation Council nations of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates have been resolutely focused on delivering their respective vision plans. The end goal is to shift hydrocarbon-dependent economies towards new, diversified industries that will sustain fast-growing GCC populations and chart a new course for the Gulf’s future.

Building deep capital markets has been critical in driving this economic overhaul. They not only provide companies with access to capital but also with frameworks to ensure it is allocated productively.

Financial markets depth and GDP growth are now strongly correlated. Indeed, the ongoing expansion of the financial services sector is providing a key component of GDP growth itself, underpinning HSBC’s 2025 forecasts of 4 per cent GDP growth for Saudi Arabia and 4.3 per cent for the UAE.^1,2

Testament to how far the region has come in unlocking capital markets for growth and foreign investment, was the participation of all seven GCC stock exchanges, together with over 300 institutional investors, at HSBC’s GCC Exchanges London Conference this week.

One of the chief attractions for international investors flocking to the region are stock markets, which offer both diversification and the prospect of consistently higher returns than developed markets where HSBC forecasts just 0.95 per cent growth in 2025³. They are also attractive compared to the broader emerging markets where we predict 3.8 per cent growth this year.⁴

A virtuous circle of increasing issuance and liquidity, together with growing investor demand and liberalised access, means that ambitious capital markets goals are now running ahead of schedule.

Saudi Arabia, which first announced its Vision 2030 Plan in 2016, set a targeted stock market capitalisation to GDP ratio of 88 per cent by the end of it⁵. It is already almost there, recording an 83.7 per cent ratio at the end of 2024^6,7,8.

Even more striking is the fact that this ratio excludes the Tadawal exchange’s largest stock, Saudi Aramco. The world’s largest oil company’s $1.54tn market capitalisation dwarfs some of the world’s largest national stock markets such as the Johannesburg Stock Exchange - in their entirety^9,10.

The Kingdom now ranks among the top 10 globally by stock market capitalisation while the UAE is in the top 20¹¹. Neither intend to stop there.

Over the past few years, both governments have used privatisation programmes to generate momentum and encourage more private sector companies to list. This strategy is paying off and speakers at the London event noted how the market expects a shift to private sector listings to continue.

In 2024, for instance, Saudi Arabia’s largest IPO was for private sector healthcare provider, Fakeeh¹². And it was Dubai, not China or the US, which delivered the world’s largest tech IPO, a $2.03bn flotation for online food and delivery company Talabat¹³.

So far this year, the region’s biggest IPO has been for another private sector company, budget airline Flynas¹⁴. All these deals further underline strong sector diversification, which will continue to push the region’s economic transformation forwards and make its stock exchanges ever more attractive places to invest.

Some of the GCC’s smaller exchanges are now ramping up too. HSBC event speakers highlighted how they are deploying national privatisation programmes to drive growth.

In Oman, the $1.99bn IPO of OQ Exploration & Production SAOG even helped the exchange to outstrip the UK as an IPO venue by deal volumes in 2024^15,16.

There has also been a big uptick in debt capital markets activity to fund infrastructure projects and economic expansion without compromising strong credit ratios and draining liquidity from local banking systems.

At $46.2 bn, Islamic bond issuance across MENA reached an all-time record in 2024¹⁷. Conventional bond issuance followed suit in first quarter of 2025, up 27 per cent year-on-year to $53.5 billion¹⁸.

As such, the capital markets are now acting as an efficient channel in supporting the region to reduce its reliance on oil, which currently accounts for almost one-third of GDP¹⁹.

They are also changing the size and shape of investment flows in and out of the region. Among the most important are those between Asia and the Middle East.

At HSBC, we think that investment integration between the two will spur a significant increase in two-way FDI and portfolio investment flows over the coming decade - from $16bn in 2024 to $37bn in 2035²⁰.

GCC exchanges are capitalising on investors’ pivot eastwards by forging official linkages with their Asian peers.

The aim is to facilitate two-way trading, ETF launches, dual stock market flotations and bond listings. One 2024 highlight was the inaugural listing of China’s sovereign bonds on Nasdaq Dubai²¹.

Saudi Arabia and Hong Kong have also been particularly active in forging ETFs that improve investor access in both regions. Examples include the first Saudi Arabia government sukuk ETF, which listed in Hong Kong in late May²².

Yet perhaps the most defining feature of the Gulf’s capital markets over the last decade is the resilience they have built. Despite global volatility caused by tariff uncertainty, activity in the region’s public and private markets has been strong, reflecting a quiet, long-term confidence.

And the first quarter of 2025 was yet another banner one for issuance. At $4.7bn, MENA equity issuance volumes were three times higher than a year ago²³.

Follow-on deals are starting to dominate too. This underlines a new growth stage for GCC exchanges as they seek to boost liquidity and free floats, building on the previous years’ strong IPO activity.

Regional governments remain determined to solidify their status as global financial hubs and climb the global rankings. Expect greater simplification of issuance procedures, further liberalisation of foreign access and further bolstering of market confidence through better liquidity and corporate governance.

HSBC Global Research analysts, speaking at the event in London, said they view the Gulf as a region relatively insulated from the global tariff war and the geopolitical strains accompanying it – in part due its trade deficit with the US.

Add to this structural growth stories driven by economic diversification towards consumption and services and it all equates to a region where the growth story remains intact and its governments will stay focused on developing financial markets that support long-term vision plans.