Saudi Stock Exchange

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Saudi Stock Exchange (Tadawul)
Saudi-stock-exchange.jpg
Headquarters Riyadh, Saudi Arabia
Key People Khalid Al Hussan, Chief Executive Officer
Products Tadawul All Share Index
Website http://www.tadawul.com.sa

The Saudi Stock Exchange (SSE), known locally by its Arabic name Tadawul, is by far the largest securities exchange in the Middle East and more than twice the size by market capitalization of second-ranked Kuwait Stock Exchange. It is the only stock exchange in Saudi Arabia.

SSE announced on August 30, 2020 that it launched its first derivatives market and a clearinghouse, The Securities Clearing Centre Company (Muqassa). Both run on Nasdaq’s market technology. The first exchange-traded derivatives product is MT30 Index Futures, an index futures contract based on the MSCI Tadawul 30 Index (MT30), which benefits from central counterparty clearing by Muqassa.[1]

Background

The beginnings of the Saudi Stock Exchange (SSE) stirred in 1984 when a ministerial committee was formed to develop and regulate the country's securities market. A further evolutionary leap was made in 2003 with the formation of the SSE's new regulator, the Saudi Capital Markets Authority (CMA), and the market continued to grow rapidly until the 2007-2008 global financial crisis.

In 2007 the SSE was converted from a mutually-owned organization into a joint-stock company, the same year the exchange switched its electronic trading system to one provided by Swedish electronic exchange developer OMX, which later became part of the NASDAQ-OMX Group.[2]

With investment markets in the Middle East sliding in 2008 the CMA moved to shore up trading on the SSE by taking steps to encourage more foreign investment in Saudi securities markets. In August 2008 the CMA released new investment rules for non-resident foreign investors that allowed them to enter swap agreements with Saudi intermediaries, in effect allowing them a form of indirect ownership of Saudi Arabian securities for the first time, Reuters reported.[3] The SSE currently lists 160 companies, and about $2.5 billion worth of shares are traded each day.[4]

On June 15, 2015, Saudi Arabia opened its stock market to foreigners for the first time.[5] The move allowed approved investors from outside the six-nation Gulf Cooperation Council to own Saudi stocks directly. It was part of an effort by King Salman to diversify the Arab world’s biggest economy away from oil,[6] which accounts for about 90 percent of government revenue. Direct trading is restricted to institutional investors with a minimum of about $5 billion in assets under management and at least five years of experience.[7]

The exchange was included in the MSCI Emerging Markets Index in 2019, a major milestone in encouraging foreign investment. The rules easing foreign institutional investment helped to make that inclusion possible, as did moving to a T+2 settlement cycle.[8]

Key products

The SSE's benchmark Tadawul All Share Index (TASI) had its calculation method changed in 2007 to exclude shares owned by Saudi government entities, foreign partners, founding partners during a restriction period and those owning more than 10% of the SSE's own shares.[9] The CMA also introduced four new equities-market sectors into the TASI calculation: banking, insurance, communications and cement.

Recent performance

The SSE was the region's best-performing equities market in 2009, gaining 27.5% over the year after losing about 60% of its value over the disastrous 2008, and rising crude oil prices are expected to fuel continued upward momentum in the investment markets through 2010.[10] In mid-2009 the Saudi Stock Exchange was ranked number one in the Middle East region with a market capitalization of $287.5 billion compared to second-ranked Kuwait Stock Exchange $122.3 billion.[11]

In the first quarter of 2010 the SSE continued to grow in value, increasing its market cap to $331.22 billion by the end of January 2010 and then to $399.24 billion one month later.[12] Over the same period (January - February 2010) the Tadawul All Share Index (TASI) has risen 5.16% and over the year to the end of January 2010 the TASI has increased by just over 30%.

Key people

References

  1. Saudi Stock Exchange Tadawul Launches New Derivatives Market and Clearinghouse. Nasdaq.
  2. Development Stages. Saudi Stock Exchange.
  3. Saudi unveils rules for foreign investors. Reuters.
  4. 5 things to know about the Saudi Arabia stock market. MarketWatch.
  5. Saudi Arabia Plans to Open Stock Market to Foreign Investors. The Wall Street Journal.
  6. Saudi Arabian Stocks Drop as Arab World’s Biggest Bourse Opens. Bloomberg.
  7. What Investors Need to Know as Saudi Stocks Open Up to the World. Bloomberg.
  8. Former London Stock Exchange executives take board seats at the Saudi Stock Exchange. The Trade News.
  9. Tadawul All Share Index. Saudi Stock Exchange.
  10. Saudi market has best 2009 performance - most Gulf markets end year up after huge losses. Reuters.
  11. Gulf Arab stock exchanges - FACTBOX. Daily Times (Pakistan).
  12. Saudi equity market cap rises to SR1.27 trillion. Zawya.