Saudi Arabia joins FTSE Russell EM Index

Saudi Arabia’s stock market (Tadawul) has been included in the FTSE Russell emerging market index and will join starting March next year, a move that is set to attract billions of dollars.

The Kingdom is projected to have an index weight within the FTSE Emerging Index of 2.7 percent, which could rise to approximately 4.6 percent following the proposed initial public offering (IPO) of 5 percent of state-owned oil firm Saudi Aramco, FTSE said in a statement.

The market will join FTSE’s secondary emerging market index in four stages starting March 2019 and ending December 2019.

The initial 25 percent tranche will be split over March and April 2019 to ensure a smooth phasing in of Saudi Arabia. The remaining 75 percent will be implemented in conjunction with FTSE quarterly reviews in June, September and December 2019, FTSE said.

Within the FTSE Global All Cap Index, Saudi Arabia is projected to have an index weight of 0.25 percent.

The Tadawul All Share Index (TASI) has risen nearly 10 percent this year, supported by expectations that FTSE inclusion will provide a positive update and could be followed by a similar decision by MSCI in June.

Analysts expected that FTSE inclusion could lead to inflows of between $4 billion and $5 billion, according to data compiled by Argaam.

“This achievement is in line with the Financial Sector Development Program which is part of the Saudi Vision 2030 and reflects the efforts of both the CMA and Tadawul,” said Mohammed El-Kuwaiz, Chairman of the Capital Market Authority (CMA).

Sarah Al Suhaimi, Chairperson of Tadawul, said: “Over the past year, Tadawul has continued to work closely with Saudi government ... to introduce capital market reforms to bolster the effectiveness of the market.

"We are proud that all these efforts have gained Tadawul inclusion in one of the most preeminent global indices to be benchmarked,” she added.

“FTSE’s announcement today is significant for Tadawul... (and) indicates growing investor confidence in the Saudi capital market and recognition that we are among the largest and most liquid emerging markets in the world,” said Khalid Al Hussan, Chief Executive Officer of Tadawul.