MSCI, FTSE laud ‘quick reforms’ in Saudi equity market: El-Kuwaiz

Index compilers FTSE and MSCI praised the “quick reforms” implemented in the Saudi capital market, ranking the Kingdom among the fastest countries applying changes ahead of a proposed inclusion in the MSCI and FTSE emerging market (EM) indexes, Mohammed El-Kuwaiz, head of the Capital Market Authority, told Argaam in an exclusive.

Most of the markets which were upgraded to the EM status, remained on watch lists for a period of two or three years, when they usually become subject to many changes.

The global indexes compilers said that the Kingdom may be upgraded in a less time, when compared to other countries.

“The Saudi Stock Exchange is closer to an upgrade by FTSE Russell by the end of this month,” El-Kuwaiz said.

FTSE investors would vote on and duly announce Tadawul’s inclusion in the index series. In case there is no voting, the index compiler will review the decision six months later. The next FTSE quarterly review will be by the end of June, he added.

The Saudi equity market ranked 13th worldwide in terms of liquidity turnover, outperforming major peers.

Tadawul, which is the Middle East’s largest capital market, also stands among the top ten markets in developing countries. It comes in the 24th place by market capitalization on the global level.

El-Kuwaiz added that cross-listing of foreign companies on the Saudi exchange is the next move. A general framework will be drawn up by the end of H1 2018 for the existing and future applicants.

“The first pilot listing of a foreign firm in Saudi Arabia is likely to be in early 2019,” El-Kuwaiz said.

The first entrant is expected to be from a neighboring GCC country, backed by similar regulations and disclosure requirements.

The cross-listing of foreign firms in Riyadh aims to enhance communication with the Saudi investment community and enable raising funds and liquidity.

Commenting on a possible dual listing for Nomu firms on Tadawul, El-Kuwaiz said firms should stay listed on Nomu for two years, so as to get adapted to governance and disclosure requirements ahead of moving to the primary market.