Inclusion in global indices reflects continued progress of
capital market reform under Vision 2030
RIYADH, Saudi Arabia,
June 20, 2018 /PRNewswire/ -- The
Saudi Stock Exchange (Tadawul) is pleased to announce today that
MSCI, a leading provider of global equity indices, upgraded the
Kingdom of Saudi Arabia to
"Emerging Market" from its previous "Standalone Market" status in
its Annual Market Classification Review. The Kingdom, which was
also recently added to the FTSE Russell as a "Secondary Emerging"
market in March 2018, will be
included in MSCI's Emerging Market Index in two phases concurring
with the May 2019 Semi Annual Index
Review and the August 2019 Quarterly
Index Review.
In its decision, MSCI cited the further market enhancements
introduced by Tadawul and the Kingdom's Capital Market Authority
(CMA) during the past year since being added to MSCI's Emerging
Market Index Watch List last June. Many of those developments have
fulfilled criteria set by the MSCI Market Classification Framework
that must be met in order for a market to be classified as Emerging
Market in its indices. The Saudi Arabia Index, with 32 securities,
is expected to have a weighting of 2.6% within the MSCI Emerging
Markets Index.
His Excellency Mohammed El-Kuwaiz, Chairman of the Capital
Market Authority (CMA) commented:
"The inclusion decision shall enhance the diversity of the
investors' base as well as the liquidity of the Saudi Capital
Market. We, at the CMA, will continue to further develop the Saudi
Capital Market to ensure that the market facilitates investments,
promotes confidence and protects investor and market
participants."
"Today's announcement from MSCI, so close on the heels of KSA's
reclassification in the FTSE Russell Global Equity Index Series,
marks the further integration of the Kingdom into global capital
markets," said Sarah Al Suhaimi,
Chairperson of Tadawul. "It is the culmination of Tadawul's ongoing
efforts to work closely with Saudi regulatory authorities and
leading emerging market investors to implement far-ranging reforms
and market enhancements to strengthen the effectiveness of the
Saudi capital market and foster an attractive investment climate
for local and international investors. We are proud that these
efforts have gained Saudi Arabia
inclusion in the leading global indexes and benchmarks."
"Inclusion in the MSCI Emerging Market Index is an important
milestone and further affirmation of the tremendous progress
Tadawul has made in the past year in broadening investor access to
the Saudi capital market, enhancing market efficiency and further
aligning market practices with global best practices," said
Khalid Al Hussan, Chief Executive
Officer of Tadawul. "Our work is never done, and additional market
enhancements are in the pipeline as we continue to strengthen and
grow investor confidence in the Saudi market."
The Road to MSCI Emerging Market Index Inclusion
Saudi Arabia was added to the
MSCI Emerging Market Index Watch List in June 2017. In its February
2018 Consultation on the proposed reclassification of
Saudi Arabia to Emerging Market,
MSCI highlighted the Kingdom's progress in implementing positive
market reforms across a range of market accessibility criteria,
including foreign ownership limits, easing of registration
requirements for Qualified Foreign Investors (QFIs), enhancements
to the clearing and settlement process and introduction of
securities lending and short selling. Since then, Tadawul and the
CMA have continued to move ahead with implementation of significant
market reforms and enhancements as part of the Kingdom of Saudi Arabia's Vision 2030 economic
transformation program, which in part seeks to bring the Saudi
market into alignment with its emerging and developed market peers.
Measures announced to be implemented since the beginning of 2018
include:
- Establishing a Central Counterparty Company (CCP) in
May 2018 to develop future clearing
services and pave the way for derivatives trading and other new
asset classes, to be fully operational by the second half of
2019.
- Listing and trading Government debt instruments
accessible to all eligible investors as of April 2018, to further strengthen the Sukuk and
Bond market by creating a yield curve.
- Implementing changes to the opening and closing price
mechanism to introduce greater price efficiency, increased
liquidity, reduced market volatility and enhanced security and a
more attractive investment climate for domestic and international
investors. The enhancements, which took effect on
May 27, 2018, include:
-
- Moving from a Volume Weighted Average Price (VWAP) to an
auction method for determining closing prices for both the Main
Market and Nomu parallel market;
- Enhancing the opening price auction in line with practices
adopted by most other major markets.
- Updating the Independent Custody Model (ICM) as of
January 2018, to enhance Qualified
Foreign Investor access to the market by providing more flexibility
in trading limits for ICM clients. Along with this change, new
procedures were introduced to mitigate credit risk associated with
the settlement process for all participants
- Introducing a new optional model for structure of
accounts (segregated accounts) to allow asset managers to aggregate
the orders of managed assets (discretionary portfolios - "DPs" -
and investment funds) in January
2018. This development assures best execution and fair
allocation for asset managers and their clients.
- Implementing a Market Making (MM) Program based on
global best practices to enhance liquidity, facilitate orderly
price formation, reduce price volatility, fortify the sukuk, bond
and ETF markets and pave the way for Exchange Traded Products (ETP)
and derivatives. MM program is also expected to be implemented
during the second quarter of 2018.
Key reforms previously implemented include:
- Amending the settlement cycle to T+2 for all listed
securities to increase the level of asset safety for investors and
to unify the settlement duration for all types of listed
securities. The amendment of the settlement cycle brings the Saudi
Market in alignment with the standards set by other international
exchanges. In addition, securities borrowing and lending and short
selling were introduced for all listed stocks. These changes went
live in April 2017.
- Dropping the cash prefunding requirement for specific
investors, leaving the timing of cash availability to the
contractual terms between the Authorized Person and the investor.
This will align trading practice with good international standards,
and standardize institutional investors' trading processes
especially investment funds.
- Introduction of Fails Management Controls that is
offered by the Securities Depositary Center (SDC) for
executing brokers to cover securities shortage by transferring
securities from the principle account, borrowing securities via SBL
function, buying securities on open market, or preforming optional
Buy-in. Also, mandatory Buy-in can be conducted by SDC.
- Introduction of a Delivery versus Payment Model
(DvP) to comply with the principle of DvP, wherein the
delivery of securities occurs only if the corresponding payment
occurs.
- Enhancements to the Independent Custody Model which
enable custodians to reject the settlement of unconfirmed trades
executed by the executing brokers in April
2017.
- Introduction of Securities Borrowing & Lending and short
selling: Tadawul is the first market in the region to offer
Securities Borrowing and Lending and covered short selling for all
listed stocks.
- Adoption of new corporate governance rules issued by the
Saudi Capital Market Authority (CMA) in February 2017. The rules enhance the rights of
shareholders and board members and provide greater clarity and more
transparency around determining commercial strategic planning,
roles, responsibilities and oversight of corporate entities and
third parties.
- Permitting QFIs to participate in IPOs, a change that
was instituted in January 2017.
- Introduction of Nomu, a parallel equity market for
Qualified Investors that offers lighter listing requirements and
serves as an alternative platform for companies to go public. The
Nomu-parallel market was launched in February 2017.
- The introduction of Real Estate Investment Traded Funds
(REITs) to further diversify the availability of investment
opportunities and promote investment in real estate for all market
participants.
- Selection of NASDAQ as the solution provider to
implement a new post-trade technology which will replace Tadawul's
current registry, depository, clearing and settlement solution with
a state of the art solution.
- Spin-off of the Securities Depository Center (Edaa),
which has been operational since January
2017 and is fully owned by Tadawul.
- Conducting Investor relations workshops and
partnerships to develop and facilitate communication between
listed companies, financial market stakeholders, financial analysts
and legislative and regulatory bodies in the Kingdom. Tadawul also
is keen on implementing investor relations global best practices
and enhancing transparency across all listed companies.
QFI Program
Saudi Arabia's QFI Program was
introduced in June 2015 to facilitate
participation by international investors in the Saudi capital
market. The QFI Program was enhanced in 2016 and again in
January 2018 to further ease the
qualification requirements for qualified foreign investors and
expand the range of institutional investors eligible for the
program. Through the QFI program, international investors now have
direct and full access to Tadawul, the largest equity market in the
GCC and MENA regions with a market capitalization of $522 billion1, and average
daily trading value of nearly $972.6
million as of May 20182. QFI
qualifying criteria and foreign ownership limits were recently
eased and the Saudi IPO market is now open to QFIs.
Since inception of the QFI program, over 150 international
financial institutions have joined with more than 200 others at
various stages in the qualifying process. As of January 2017, QFIs can participate in all Saudi
domestic IPO offerings. This accelerated growth in the QFI program
reflects the progress that Tadawul has made in aggressively moving
forward with several initiatives to reform the exchange and attract
foreign capital.
For more information on today's announcement from MSCI click
here.
About Tadawul
The Saudi Stock Exchange (Tadawul) is
the sole entity authorized in the Kingdom
of Saudi Arabia to act as the kingdom's securities exchange
(the Exchange), listing and trading in securities. With a market
capitalization of over $522 billion,
the Saudi stock market is the 23rd largest stock market
among 68 members of the World Federation of Exchanges, and is the
dominant market in the Gulf Cooperation Council (GCC) comprising 48
percent of total GCC market capitalization and 75 percent of value
traded. For more information on Tadawul, please
visit www.tadawul.com.sa.
Tadawul Contact:
Abdullah Al-Sharif
Tadawul
abdullah.sharif@tadawul.com.sa
+966 555 114 404
Media Contacts:
Amy
Rosenberg
Hill+Knowlton Strategies
amy.rosenberg@hkstrategies.com
+1 212 885 0581
Bobby Morse
H+K Financial
bobby.morse@hkstrategies.com
+44 (0)20 7466 5151
Investor Relations Contact:
Rouaa Fadl
Marco
rouaa@marco.sa
+966 599 589 552
1 https://www.tadawul.com.sa/wps/wcm/connect/6073e5f6-37ce-469e-b72b-e0a33ed45c8b/Saudi+Stock+Exchange+%28Tadawul%29%2CStatistical+Report+%E2%80%93+May+2018.pdf?MOD=AJPERES-
Market capitalization listed at SAR 1,957.59
billion (USD $522.02 billion)
in May 2018
2 https://www.tadawul.com.sa/wps/wcm/connect/6073e5f6-37ce-469e-b72b-e0a33ed45c8b/Saudi+Stock+Exchange+%28Tadawul%29%2CStatistical+Report+%E2%80%93+May+2018.pdf?MOD=AJPERES–
average daily trading value listed at SAR
3,648,083,207.52 (USD $972,614,734.34
million) in May 2018
Logo -
https://mma.prnewswire.com/media/489723/Tadawul_Logo.jpg