MSCI, Tadawul to launch joint tradeable index in Q4

The new index is expected to pave the way for the development of exchange-traded products
MSCI, Tadawul to launch joint tradeable index in Q4
The new index - which will be based on a larger MSCI Saudi Arabia Index series – will be available from the fourth quarter of 2018.
By Bernd Debusmann Jr
Wed 05 Sep 2018 09:48 AM

Global index compiler MSCI has penned an agreement with the Saudi Stock Exchange (Tadawul) to create a joint tradeable index that it hops may lead to the growth of exchange-traded funds and other investor products, it was announced on Tuesday.

The new index - which will be based on a larger MSCI Saudi Arabia Index series – will be available from the fourth quarter of 2018.

MSCI reclassified Saudi Arabia as an Emerging Market in June as part of their annual market classification review.

“Saudi Arabia has undergone a remarkably rapid period of change in the past few years,” said Henry Fernandez, chairman and CEO of MSCI. “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, the CEO of Tadawul, said that the creation of the joint index “provides a strong foundation for the development of future 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.”

In July, UBS Global Wealth Management’s chief investment office estimated that MSCI’s move to include Saudi Arabia on the MSCI Emerging Markets index will attract “significant” capital inflows of $45 billion to the kingdom.

According to UBS, the inclusion should translate into $10 billion from passive and $35 billion from active investments, in addition to $5 billion in inflows stemming from rival index provider FTSE’s recent inclusion of Saudi Arabia on its own Emerging Market benchmark.

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