Skip to main content

Global index provider MSCI said on Tuesday it had signed an agreement with the Saudi Stock Exchange Co. (Tadawul) to jointly launch a tradable index later this year in a move that could spur the growth of derivatives and exchange-traded funds.

Tadawul said in a separate statement it would introduce exchange-traded derivatives in the first half of 2019.

The moves come after MSCI classified the Saudi Arabian equity market as an emerging market in June, which is expected to attract billions of dollars of passive funds.

Story continues below advertisement

The Saudi index is up 10 per cent so far this year, but has eased this quarter on profit taking after a strong run ahead of the MSCI review when foreign fund flows accelerated.

MSCI said the index would be based on the broader MSCI Saudi Arabia index series, part of the MSCI Emerging Markets Index.

The joint tradable index will be available in the fourth quarter of 2018.

“Saudi Arabia has undergone a remarkably rapid period of change in the past few years,” said Henry Fernandez, chairman and chief executive of MSCI. “This joint index is possible as a result of the kingdom’s adoption of international standards and desire to create additional investment opportunities for domestic and international investors.”

Khalid al-Hussan, CEO of Tadawul, said the creation of the index provided a strong foundation for the development of index futures and other exchange-traded products.

He said the introduction of derivatives in 2019 was part of Saudi Arabia’s Vision 2030 Financial Sector Development Program.

“This reflects Tadawul’s ongoing commitment to create new opportunities for investors and to increase institutional investors’ participation in the Saudi market,” Hussan said.

Story continues below advertisement

Saudi Arabia has launched a string of market reforms since 2015, when the Riyadh exchange opened itself to direct investment by foreign institutions and began easing restrictions on foreign ownership of companies.

The reforms have encouraged international firms such as BlackRock Inc., Citigroup Inc., HSBC and Ashmore Group PLC to invest directly in the market.

However, Saudi authorities’ plan to sell a 5-per-cent stake national oil giant Saudi Aramco has been shelved because of valuation and regulatory concerns, sources said this month.

This content appears as provided to The Globe by the originating wire service. It has not been edited by Globe staff.

Report an error
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter