The Saudi Financial Market Joins the MSCI Index in Emerging Markets

The Saudi stock market will be included in the MSCI index in two phases, the first during the mid-year review of the index in May 2019, and the second during the review of the third quarter in August 2019.

This accession comes as the second accession to a global index after the FTSE Russell Group, which included the Saudi market for emerging markets in its global index in March.

In its announcement, MSCI praised the tangible developments and efforts made by Tadawul and the Saudi Arabian Capital Market Authority (SAMA) during the last year since the Saudi Stock Exchange joined the index’s watch list in June 2017. The Saudi stock market was able to meet international standards The indicator places it as an emerging market. MSCI also mentioned that 32 companies listed on the Saudi Stock Exchange are likely to be included in the index and that the weighted market weight in the index will be 2.6%.

Mohammed Al-Quwaiz, Chairman of the Capital Market Authority (CMA), expressed his pleasure at joining the Saudi Stock Exchange (MSCI) for the MSCI Emerging Markets Index. “We are proud of this achievement, which will support the expansion of the investor base in the financial market and improve its liquidity levels. We also confirm that the Capital Market Authority is continuing.”

The Saudi stock market was added to the watch list in the MSCI Index in June last year. In a special report published by the MSCI Index in February 2018 on the Kingdom’s promotion to an emerging market, the report confirmed that the Saudi financial market has made positive achievements, including increasing the proportion of foreign ownership limits, easing the registration procedures of qualified foreign investors, improving clearing and settlement procedures, enabling lending and borrowing securities In the market and covered short sale.

In view of the vision of the Kingdom of Saudi Arabia 2030, Tadawul and the Authority have worked to achieve several fundamental developments in the Saudi financial market in order to facilitate access to them, improve their efficiency, increase the levels of governance and transparency and enhance their position as a market leader in the region in terms of volume, liquidity and attractiveness. :

• The establishment of the Securities Clearing Center in May 2018 with the aim of developing future clearing services in line with the best practices of risk management and international standards, which is expected to be fully operational during the second half of 2019.

• The inclusion and circulation of government debt instruments to all categories of investors in April 2018, with the aim of deepening the sukuk and bond market by creating a price curve for the sukuk and bond market.

• Modifying the mechanism used to determine the closing price of the main market and the parallel market growth in May 2018 from the mechanism of calculation of the VWAP to the auction mechanism, as well as improving the mechanism of opening the market (auction mechanism) to standardize the opening and closing mechanism of the market according to international best practices. .
• Develop an independent custody service in January 2018 to enable institutional investors – both locally and internationally – to gain better trading limits. This change is expected to result in the introduction of new regulations to reduce the risks associated with settlement procedures for all market participants.

• Launching a new, optional service for asset managers in January 2018, which allows them to combine all asset management orders (private portfolios and investment funds) into one comprehensive order, ensuring that assets are managed fairly and accurately.

• Implementing the market maker model to increase liquidity, regulate prices and support sukuk markets, bonds and mutual funds. This opens the way for the provision of new investment instruments in the market such as derivatives and investment products traded, expected to be implemented during the second quarter of 2018.

Over the past two years, the Saudi stock market has also worked on the following developments:

• Adjustment of the duration of the settlement of securities transactions listed on the Saudi Stock Exchange within two business days following the date of execution of the transaction (T + 2) in April 2017, with the aim of strengthening the rules of asset protection and standardizing the settlement period for all securities in line with the best international practices applied in the markets. Global.

• Drop the pre-payment requirements of some investors so that the availability of cash depends on the terms agreed upon between the licensed persons and the investors, in order to harmonize trading practices with international standards and standardize the procedure.