Riyadh – Mubasher: The addition of the Saudi Stock Exchange (Tadawul) to the MSCI Emerging Market Index’s Watch List is expected to increase the liquidity and benefit the listed companies and investors, Tadawul’s chairperson said.
“Saudi Arabia’s addition to the MSCI Watch List is an important milestone for Tadawul, and reflects the Kingdom’s significant progress in capital market reform in support of Vision 2030,” Sarah Al Suhaimi, Chairperson of Tadawul, added.
Al Suhaimi noted that the inclusion of the Saudi market to the global index signals the maturity of the Saudi capital market in terms of efficiency, governance, and regulatory framework, according to a bourse filing on Wednesday.
The International Monetary Fund (IMF) expected that the growth in emerging markets globally would improve for the second consecutive year, where it is projected to rise 4.5% in 2017, compared to 4% and 4.1% in 2015 and 2016, respectively.
Over the past year, Tadawul and the Capital Market Authority (CMA) have worked closely with Saudi government bodies and leading emerging market investors to introduce Vision 2030 capital market reforms, and these have in turn helped move the needle further on achieving Watch List status, the statement said.
Key reforms included the introduction of T+2 settlement and securities borrowing and lending, which have significantly enhanced the ease of trading and created new opportunities for market participants.
The adoption of the Global Industry Classification Standard (GICS) in January is one of the reforms as well, as it enhances comparability of corporates across markets and enables easier analysis of sector performance.
A Delivery versus Payment Model (DvP) to comply with the principle of DvP, to provide an extra layer of trade execution security to investors that trade securities on Tadawul comes among the reforms, the statement added.
Reforms also included launching a Real Estate Investment Trusts’ (REITs) market to further broaden and diversify investment opportunities, in addition to establishing Securities Depository Center (SDC) to promote the efficiency of deposit and registration services.
“Today’s announcement from MSCI is an immense achievement for Tadawul and the Saudi market. However, it is still just another stepping stone toward gaining full Index inclusion,” Tadawul CEO, Khalid Al Hussan, said.
Al Hussan added that the market shall be further strengthened through reforms and investor confidence to be built so that the position of the market may be maximised in 2018 to be formally listed in MSCI.
“With anticipated MSCI index inclusion now one step closer and a number of other favorable dynamics taking place in the Saudi market, Saudi Arabia’s ongoing economic transformation through diversification and privatisation and favorable demographics for sustainable growth makes it a uniquely attractive emerging market,” the CEO continued.
Saudi Arabia had opened its market to international investors in June 2015 through its Qualified Foreign Investor (QFI) programme and has to date registered more than $5.48 billion worth of investable assets.
The value of QFI holdings increased more than 3.5 times during the first quarter of 2017, while value traded on Tadawul levelled up 19.9% month-on-month in May 2017.
