Capital Goods in Saudi Arabia

Capital Goods in the Kingdom of Saudi Arabia are those used in producing other goods and consumed over a longer period, unlike consumer goods consumed directly and within a short period. Examples of capital goods are buildings, machinery, equipment, industrial facilities, and all elements that collectively form the national production capacity.

Capital goods represent long-term assets and are not typically bought and sold as part of a company's routine commercial operations. These goods provide services at present and over the medium and long term, contributing to the expansion of social wealth and the flow of social income due to their role in forming fixed capital. They include purchases of buildings, land, stocks, and donations.

The value of capital goods became prominent in the indicators of the Ninth Development Plan, where the value of commodity imports (at current prices) increased from SAR177.7 billion in 2004 to SAR431.7 billion in 2008, with an average annual growth rate of 24.8 percent.

This same increase was reflected in the structure of commodity imports, as the share of capital goods in total commodity imports increased from 17.5 percent in 2004 to 24.7 percent in 2008.

The value of the Kingdom’s exports of capital goods also grew, driven by its diverse industries and significant export activity to global markets. In 2010, these exports reached SAR11.2 billion, with a relative importance of 1.2 percent of the Kingdom’s total exports, and the weight of Saudi exports from them reached 477,000 t.

The capital goods sector continued its growth, achieving a growth rate of 83.5 percent by the end of the first quarter of 2024, ranking second in the industrial group after the 'public utilities', which achieved the highest growth rate of 84.4 percent.

The movement of capital goods in the Kingdom's trade balance evolved so that the weight of imports reached 2,489,000 t in 2016 with a value of SAR111,680 million. This value decreased in 2017 to 2,229,000 t, valued at SAR107,388 million, and further to 2,055,000 t in 2018, with a value of SAR106,614 million. Afterwards, it increased to 2,544,000 t, valued at SAR126,993 million in 2019. Imports of capital goods decreased in 2020 to 2,285,000 t, valued at SAR104,018 million, but increased again in 2021 to 3,144,000 t, valued at SAR105,508 million.

Also, the Kingdom's capital goods exports in 2016 weighed 565,000 t, valued at SAR17,523 million, increasing to 701,000 t, valued at SAR15,888 million in 2017. Exports then declined to 585,000 t, valued at SAR13,232 million in 2018, and to 574,000 t, valued at SAR16,616 million in 2019. Capital goods exports reached 593,000 t, valued at SAR19,508 million in 2020, and increased to 949,000 t, valued at SAR23,764 million in 2021.

Capital goods companies are active in the Saudi Stock Exchange "Tadawul" through the capital goods sector, which is classified as a level II sector under the primary industries sector, according to the requirements of the Global Industry Classification Standard (GICS) in the stock market. The market sector structure consists of twenty sectors representing level II (the sector) of this standard. The calculation of new sector indices and their summaries are based on this same level (the sector). Additionally, level I information (the primary industries sector) is published in the company files on the "Tadawul website".

In the Saudi stock market activity by sector for 2023, the number of shares traded in the capital goods sector amounted to 2,709,116,291, representing 3.26 percent of total shares. The value of the shares traded in the sector amounted to SAR40,886,400,496, representing 3.07 percent of the total, with 4,052,041 executed transactions, representing 4.31 percent of the total. The sector market value reached SAR40,012,087,373, representing 0.36 percent of the total market value.

Given the parallel market "Nomu" activity by sector for 2023, the capital goods sector ranked first with about 141,013,841 shares traded, accounting for 22.09 percent of total traded shares. In terms of the value of shares traded in "Nomu" in 2023, the capital goods sector ranked third, with a value of SAR964,572,866, representing 11.95 percent of the total. The basic materials sector ranked second, with a value of SAR1,128,099,314, representing 13.98 percent of the total. By reviewing the performance of Nomu in terms of the number of executed transactions, the capital goods sector ranked third with 89,460 transactions, representing 13.18 percent of the total transactions.

The market performance of companies in the capital goods sector has evolved alongside the growth and development of the capital market. According to statistics from the Saudi stock market for the first quarter of 2024, the number of executed transactions in the capital goods sector reached 1,883,923, representing 5.38 percent of the total transactions. The number of shares traded amounted to 1,637,594,488, accounting for 6.79 percent of the total shares traded, with a total value of SAR23,873,852,399, representing 4.15 percent of traded shares total value.

The upward performance continued in the parallel market "Nomu," where, according to first-quarter 2024 statistics, the number of executed transactions in the capital goods sector reached 24,643, accounting for 13.05 percent of total transactions. On the other hand, the number of traded shares amounted to 71,520,751, representing 38.47 percent of the total traded shares, with a total value of SAR609,584,032, representing 18.32 percent of the total traded value of shares.