Abu Dhabi, UAEWednesday 20 November 2019

MSCI and Tadawul launch tradeable index on 30 biggest Saudi equities

The move is a step towards creating a derivatives market in the kingdom

Visitors look at stock price information displayed on a digital screen inside the Saudi Stock Exchange. Bloomberg
Visitors look at stock price information displayed on a digital screen inside the Saudi Stock Exchange. Bloomberg

MSCI, the global index provider, and the Saudi stock exchange launched a tradeable index on some of the kingdom's biggest listed companies, a move aimed at creating a derivatives market in the Arab world’s largest economy.

The MSCI Tadawul 30 Index will initially comprise the 30 biggest securities listed on the bourse, known as Tadawul, MSCI said in a statement on Wednesday.

MSCI did not name the companies that will be included in the index. With market capitalisation just a notch under half a trillion dollars, Tadawul is the biggest equities market in the six-member economic block of GCC, accounting for about half of the the region’s total market cap and 80 per cent of value traded on the regional exchanges.

It is home to some of the top listed companies including Saudi Basic Industries Corporation, the biggest petrochemicals producer in the Middle East, mining giant Maaden, dairy conglomerate Almarai and financial institutions like National Commercial Bank and Alrajhi Bank. The exchange is preparing to welcome Saudi Aramco, the biggest oil producing company in the world, when it lists its shares by 2021.

Plans for the tradeable index were announced by MSCI and Tadawul in September last year. MSCI has also changed Saudi Arabia’s classification to an emerging market in June 2018 after capital markets reforms and the opening of the kingdom's equity market to a broader pool of investors.

Saudi Arabia will enter the MSCI Emerging Markets Index in two phases this year, with the first phase set to coincide with MSCI’s Semi-Annual Index Review in June.

The new index launched on Wednesday will provide investors with a benchmark of the kingdom’s largest liquid stocks and serve as the basis for development of an index futures contract listed on Tadawul. It can be licenced for other index linked financial instruments, including mutual funds, derivatives and exchange-traded products, MSCI noted.

“Today’s launch …. is a significant step forward in facilitating the creation of a derivatives market for Saudi Arabia and advancement of the Vision 2030 financial sector development programme,” Khalid Al Hussan, chief executive of Tadawul, said. “With additional derivatives launches in the pipeline, including the introduction of an associated exchange-traded index futures contract, we expect to make significant strides this year in further enhancing market efficiency and creating new opportunities for investors.”

Updated: January 30, 2019 05:58 PM