MSCI partners with Tadawul on new tradeable equity index

Sep 5th, 2018 | By | Category: Equities

Indexing giant MSCI has partnered with the Saudi Stock Exchange, or Tadawul, to create a tradeable index that can serve as the basis for investment instruments including ETFs.

MSCI partners with Tadawul on new tradeable equity index

Khalid Al Hussan, Chief Executive Officer of Tadawul.

The index will be based on the broader MSCI Saudi Arabia Index series that will be part of the MSCI Emerging Markets Index. The joint tradeable index will be available in Q4 2018.

In June 2018, MSCI announced the classification of the Saudi Arabian equity market as an emerging market as part of their annual global market classification review.

Indexing rival FTSE Russell upgraded Saudi Arabia to emerging status in April following its March country classification review.

Henry Fernandez, Chairman and Chief Executive Officer of MSCI, said, “Saudi Arabia has undergone a remarkably rapid period of change in the past few years. 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, Chief Executive Officer of Tadawul, added, “The creation of the joint tradable index provides a strong foundation for the development of index futures and other exchange-traded products. As the Saudi market is fully integrated into global emerging market indices, including MSCI, the launch of an index will pave the way for ETFs and other products that enable investors to broaden exposure and diversify and risk while enhancing the overall efficiency of the market.”

A couple of Saudi-linked ETFs already exist in the form of the iShares MSCI Saudi Arabia ETF (KSA US) listed on NYSE Arca and the recently launched Invesco MSCI Saudi Arabia UCITS ETF (MSAU LN) on the London Stock Exchange. These funds have $257m and $48m in assets under management respectively.

Investment interest in Saudi Arabia has been piqued by the anticipated initial public offering of Saudi Aramco, the state-owned national petroleum and natural gas giant, thought to be the world’s most profitable company.

A dual flotation on Tadawul and either London Stock Exchange or New York Stock Exchange was seen as the most likely outcome. However, these plans now appear to have been shelved, taking the edge off some of the recent interest.

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