Why 2025 Was a “Pressure Year” for #TASI

Let’s be realistic: 2025 wasn’t just “bad luck.” It was a year where the Saudi market got squeezed from multiple angles at the same time.

The year-end number says it clearly: TASI closed on 31 Dec 2025 at 10,491 points vs. 12,037 at the end of 2024 — a yearly drop of about -12.8%.

In market language: that’s one of the weakest annual performances in roughly a decade, with many market trackers describing it as the biggest annual decline since 2015.

The story in one sentence

The market didn’t fall because investors “stopped liking stocks.” It fell because the cost of money stayed high, liquidity was thin, earnings and valuations didn’t help — and global capital rotated toward other markets.

1) The key drivers behind one of the worst years in ~10 years

1) High interest rates killed risk appetite

When interest rates stay elevated for too long, a painful reality kicks in:
safe alternatives (bank deposits, sukuk, fixed income) become serious competitors to equities.

For the retail investor—especially conservative portfolios—the logic becomes:
“Why take equity risk when safer yields are attractive?”

This pressure tends to be stronger in GCC markets because monetary policy is largely linked to the US dollar cycle, making local conditions more sensitive to Fed moves.

2) Thin liquidity makes every sell-off worse

In a low-liquidity market, sellers don’t always find institutional buyers ready to absorb volume.
That’s when declines accelerate: selling has more impact when the bid side is weak.

A clear example: November 2025 delivered a sharp hit (-9.1%), with TASI closing around 10,591 vs. 11,656 in October.

3) Oil isn’t the only driver anymore — but it still shapes sentiment

Saudi Arabia’s economy is more diversified today, yes.
But oil still influences regional sentiment—especially when it comes with headlines about oversupply and weaker global demand.

Reuters also pointed out that oil was heading for a decline exceeding 15% in 2025, reinforcing pressure on market confidence.

4) Heavyweights’ earnings and guidance mattered more than usual

TASI is a heavyweight-driven index.
Any earnings slowdown or weaker-than-expected guidance from large companies (especially in “big weight” sectors) hits the index hard because their impact is magnified.

5) Valuations after 2023–2024 needed a “reset”

After strong prior years, part of 2025 was simply repricing:
The market basically said: “Show me earnings growth that justifies the valuation.”
If growth under-delivers, profit-taking becomes natural.

6) Foreign flows were selective, not loyal

In 2025, global money moved smartly (and sometimes brutally):
it chased clear growth narratives and momentum elsewhere.

Reuters summed it up: Saudi’s index was down around ~13% in 2025 within a mixed GCC performance picture.

7) Geopolitics added a risk discount

Even without immediate earnings impact, regional tensions raise the risk premium.
That pushes both retail and institutional investors to reduce exposure.

8) Aramco’s weight: sometimes a shield, sometimes a bottleneck

When the biggest weight can’t offset weakness elsewhere, the index becomes like a ship with one engine.

Reuters noted Aramco fell more than 15% in 2025 (its worst year since the 2019 listing), helping explain why the index couldn’t “self-stabilize.”

9) Vision 2030 execution uncertainty

Markets dislike fog.
Any delay or rescheduling—even temporary—triggers the question:
“When does this translate into real earnings and cash flows?”
Markets don’t price promises; they price cash flow.

10) Global rotation toward other markets

While TASI struggled, many global markets posted strong gains.
Example: FTSE 100 finished 2025 up about +21.5%.

That creates a psychological comparison:
“Why stay in a slow market while others are flying?”
…and capital rotates away.

2) How much did interest rates + weak liquidity contribute?

Honestly: they were the core operational pressure all year.

High rates increased the opportunity cost of holding equities.

Weak liquidity amplified drawdowns because the market had less depth, making sell waves more damaging.

Quick analogy:
High rates = tight brakes
Thin liquidity = a slippery road
Try driving fast in that setup… good luck 😄

3) Temporary correction or structural change? And 2026 scenarios

Most likely: both.

Temporary correction:

Repricing after previous rallies + high rates + oil and global volatility.

Structural shift:

Investors are increasingly demanding real, sustainable earnings growth (especially from Vision 2030-linked sectors),

and the Saudi market is becoming more sensitive to global liquidity cycles.

Three practical 2026 scenarios (framework, not a recommendation)

Base case: gradual recovery

Improving liquidity mood with expectations of easing global policy + relatively stable oil.

Bull case: stronger rebound

Better earnings + stronger foreign inflows + successful listings/growth sectors — but only if numbers beat headlines.

Bear case: continued pressure

Oil weakness, delayed rate cuts, or geopolitical escalation keeps the risk premium high.

2025 numbers that matter for retail investors

High: 12,536 (29 Jan)

Low: 10,367 (15 Sep)

Lowest close (same tracking): 10,427 (15 Sep)

Year-end close: 10,491 (31 Dec)

The common blind spot

If you explain everything through oil alone, you’re oversimplifying.
2025 proved that liquidity + rates + earnings can be more important than oil for medium-term market direction.
Oil matters—yes—but it’s not the only remote control.

How to operate as a retail investor in #Saudi_Stock_Market

Instead of asking “Will it go up?” ask:
“How do I stay positioned for any scenario?”

Split the portfolio: defensive income (dividends/sukuk) + selective growth

Don’t chase stories: chase earnings, cash flow, and valuation

Run risk management like a business: stops, position sizing, diversification—because thin liquidity punishes mistakes fast