DUBAI: Khalid Al-Hussan seemed to be enjoying himself last Thursday at the Riyadh headquarters of Tadawul, the Saudi Arabia stock exchange, of which he is chief executive. In fact, a quiet smile of satisfaction rarely left his face, even under the bright glare of the television lights of the international media.
“We’ve all worked very hard and we’re very pleased,” he told Arab News once the TV cameras had left, adding that it had been “one of the best days” of his professional career.
Al-Hussan had just left the podium of a press conference — shared with Tadawul chairperson Sarah Al-Suhaimi and the chairman of the Capital Markets Authority, Mohammed Al-Kuwaiz — to announce the fact that, after three years of preparation, Saudi Arabia had finally been included in MSCI’s Emerging Markets index.
It was actually more of a celebration than an announcement. MSCI had broken the news some hours earlier that Saudi Arabia was to be classed as an emerging market (EM), rather than a frontier market, putting the Kingdom on the radar of international investors in a big way. All three of the market dignitaries were in effusive mood, gratefully accepting multiple “mabrouks” from the media pack.
The move by MSCI, it is estimated, will pull in as much as $45 billion in foreign investment to the Saudi exchange; that figure could rise sharply if the Saudi Aramco listing goes ahead on the bourse. That is a huge boost for a market with a current market capitalization of about $520 billion.
It has already been quite a year for the Tadawul chief, with a lot of the hard work of his previous three years in the job paying off handsomely. In March, another international index compiler, FTSE Russell, had also upgraded Saudi to emerging market status, and there have been launches and bolt-ons of other services essential for a modern stock market, such as a central clearing system.
Perhaps most importantly of all, the Tadawul has been one of the best-performing markets in the world in 2018, with a 13 percent rise in the first six months. “It has been one of the best years, rather than just a good day today,” Al-Hussan said.
“MSCI inclusion is a reflection of how our reforms have been widely accepted, by local and international markets. It was designed as a plan to achieve what we have today,” he added.
The Riyadh exchange has always been the biggest in the Arabian Gulf region, but since 2015 it has been transformed into one of the most modern and efficient too.
New, internationally recognized settlement systems have been introduced, governance systems upgraded, and foreign investors welcomed. The status upgrades by global investing organizations — there is another due from S&P before the end of the year — are the logical end of all this work.
It has not been without its challenges, Al-Hussan remarked. “To balance the needs of international and local investors was sometimes a challenge, especially in the move to new settlements systems. But if you understand the market, and know where you’re trying to get to, it’s possible to get both of them working together,” he said.
There is another challenge, which in some ways the MSCI upgrade is designed to overcome: the nature of share trading and stock markets within the broader economic context of Saudi Arabia and the Arabian Gulf. It is an issue of the perception of the region in the world as much as anything else.
While analysts generally welcomed news of the MSCI upgrade, some delivered the opinion that inclusion in international indices was not in itself so significant for regional markets, and the Saudi market in particular.
Other factors ultimately determined the health and appeal of Gulf markets, the theory went, in a part of the world where the oil price is the single most important economic factor, and regional geopolitical events color global investors’ overall views. Foreign confidence in Saudi Arabia was also hesitant, given the sheer pace of the change going on in the Kingdom under the Vision 2030 strategy, it had been argued.
It is a line Al-Hussan has heard before, and he has a ready answer. “I disagree that MSCI inclusion is less important than these other factors. It is a sign of the confidence of international investors in the Saudi market, and a reflection of how confident they feel here,” he said.
“The new cash that we can expect from international investors — around $40 billion — is not small or insignificant, and these people will not take risks lightly. The people at MSCI are pretty intelligent too. They have never moved a country from the watchlist to full EM status so fast — in just 12 months — so that tells you about their confidence, and the confidence of their clients, in Saudi Arabia,” he added.
And, finally, there is the clinching argument that non-market factors can always have a profound effect on financial markets, and not just in Saudi Arabia or the Gulf countries. “Economic and geopolitical factors could have an effect on markets anywhere in the world, not just here,” he said.
An engineer by training, Al-Hussan was educated in the US to MBA standard, and qualified as a certified entrepreneur from the University of Colorado. His previous career in the insurance industry made him aware of the need to weigh risk; 10 years at Tadawul — working across virtually all its functions from business development to strategy and operations before becoming CEO — has seen him apply those lessons in the context of financial markets.
There is a lot more to do, Al-Hussan insisted. “Our plans never end. I’m more excited about what’s to come as we continue to enhance the market’s future” he said, before outlining the strategy to launch a full national clearing system that would enable Tadawul to launch derivatives trading platforms by the end of 2020 in a staged process.
There is also the plan to enhance the market-making function, so that traders can operate to international best practice standards by the end of this year. “There is already a model in place, but it will be perfected to global standards by the end of the year,” he said, rejecting suggestions that the innovations at the Tadawul might encourage the inflow of speculative “hot money” into the Kingdom.
All this reform and improvement is desirable in itself, of course, and for the good of the Kingdom’s financial markets. But there is a big goal in sight that Al-Hussan and Tadawul are aware they must keep in focus: the historic initial public offering of Saudi Aramco, as well as the other multibillion-dollar privatizations that are planned under the Vision 2030 plan.
“Of course, there is Aramco,” he said as he contemplated the list of tasks ahead. The IPO of the biggest oil company in the world is the centerpiece of the Kingdom’s plans to transform its economy away from oil dependency, and Tadawul has been designated the “home market” for the IPO.
The biggest stock exchanges in the world — New York, London, Hong Kong — have all been mentioned as possible venues for Aramco, but it is certain that Tadawul will also play a big part in the sell-off.
Al-Hussan caused quite a stir at last year’s Future Investment Initiative in Riyadh when he declared his “aspiration” to stage the IPO exclusively on Tadawul. He has since repeated his confidence that the Saudi exchange could handle the whole issue, which could be worth as much as $100 billion.
“Of course, I would like to have all of it, but that is a decision for Aramco and for its shareholder, the government. We will support whatever decision they reach,” he said. He also confirmed that Aramco would not have to wait until the MSCI upgrade — coming into force in two stages from May of next of year — is fully implemented. “We will be ready for it as soon as the decision on the IPO is made,” he said.
If the government did decide to put the whole of the Aramco IPO on Tadawul, it would change the character of the exchange completely, and alter MSCI’s calculations significantly.
MSCI awarded Tadawul a weighting of 2.6 percent of its global EM market, but that would increase enormously if Aramco were included. Al-Hussan agreed it could double the amount of funds flowing into the Saudi Arabian market.
It could also tie the fortunes of the Tadawul to the global oil industry in a way it is not now, by making it dominated by the biggest energy company in the world. Part of his philosophy has been to make the Tadawul — where banks and heavy industrial companies play a dominant role — more attractive to other sectors and more reflective of the changing national economy.
“We still aspire to do it. It would be a challenge, of course, but I think over the past three years, and with the upgrades, we’ve shown that we meet challenges,” he said.
After MSCI upgrade, Tadawul chief turns to the next challenge for Saudi Arabia
After MSCI upgrade, Tadawul chief turns to the next challenge for Saudi Arabia
Saudi Arabia, Azerbaijan discuss climate action cooperation ahead of COP29
- Two ministers discussed opportunities for work and cooperation between their two countries in the field of climate change
JEDDAH: Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman met with Azerbaijan’s Minister of Environment and Natural Resources Mukhtar Babayev on Thursday.
Babayev has also been appointed president of the UN COP29 climate talks which will be held in Baku in November.
During the meeting, the two ministers discussed opportunities for work and cooperation between their two countries in the field of climate change. They also talked about joint efforts to achieve the goals of the UN Framework Convention on Climate Change and the Paris Agreement, the Kingdom’s ministry said in a statement.
They reviewed the Kingdom’s efforts and initiatives in dealing with the effects of climate change, such as exploiting renewable energy sources, and managing, reducing and eliminating emissions through the Saudi and Middle East green initiatives.
In addition, the ministers discussed implementing the circular carbon economy approach and its technologies, which was developed by the Kingdom during its G20 presidency and endorsed by leaders, along with other national and regional programs and initiatives.
Saudi Arabia unveils Green Finance Framework in sustainability push
RIYADH: Public and private participation in climate financing in Saudi Arabia is poised to receive a boost with the introduction of the Green Finance Framework.
This initiative, launched by the Ministry of Finance, is aimed at propelling the nation toward its sustainability goals and achieving net-zero emissions by 2060, Saudi Press Agency reported.
The framework is expected to contribute to the efforts aimed at reducing emissions through a circular carbon economy approach, along with positioning Saudi Arabia as a regional leader in sustainable finance.
It was in October 2021 that Saudi Arabia announced its ambitious goal to achieve net-zero emissions by 2060.
With this framework, the Kingdom aims to significantly reduce greenhouse gas emissions by 278 million tonnes annually by 2030, aligning with the commitments under the Paris Agreement.
The Paris Agreement is an international treaty on climate change that was produced in 2015 and compels signatories to work toward limiting the global temperature increase to 1.5 °C above pre-industrial levels.
The Kingdom has been spearheading several initiatives including the Saudi Green Initiative to combat the adverse effects of climate change over the past few years.
On March 27, the Kingdom celebrated its first Saudi Green Initiative Day highlighting the importance of fostering a sustainable legacy for future generations.
The celebration was organized under the theme “For Our Today and Their Tomorrow: KSA Together for a Greener Future” and it highlighted the collaboration of more than 80 public and private sector projects that are part of the SGI.
To date, Saudi Arabia has deployed 2.8 gigawatts of renewable energy to the national grid, powering more than 520,000 homes, with additional projects underway to increase capacity.
Moreover, more than 49 million trees and shrubs have been planted throughout the Kingdom since 2021, and extensive land rehabilitation efforts have been undertaken.
Additionally, energy giant Saudi Aramco, in collaboration with the Kingdom’s Ministry of Energy is building a carbon capture and storage hub in Jubail, which will have 9 million tonnes annual storage capacity upon its completion in 2027.
Closing Bell: Saudi main index slips to close at 12,565
RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Thursday, losing 42.09 points, or 0.33 percent, to close at 12,565.89.
The total trading turnover of the benchmark index was SR10.53 billion ($2.8 billion) as 54 stocks advanced, while 170 retreated.
Similarly, the Kingdom’s parallel market, Nomu, dropped 385.72 points, or 1.43 percent, to close at 26,622.88. This comes as 20 stocks advanced while as many as 42 retreated.
Meanwhile, the MSCI Tadawul Index rose 7.54 points, or 0.47 percent, to close at 1,599.02.
The best-performing stock of the day was Modern Mills for Food Products Co. The company’s share price surged 9.46 percent to SR68.30.
Other top performers include the Mediterranean and Gulf Insurance and Reinsurance Co. as well as Al Yamamah Steel Industries Co.
On the announcements front, Red Sea International Co. announced its annual consolidated financial result for the period ending Dec. 31.
According to a Tadawul statement, the entity’s revenues reached SR1.37 billion in 2023, reflecting an increase of 241 percent when compared to 2022 figures.
The rise in sales is mainly attributed to the strategic acquisition of a 51 percent stake in Fundamental Installation for Electric Work Co., or First Fix, with the recognition in RSI’s consolidated financial statements starting in the final quarter of the year.
Additionally, the company has tactically increased its focus on enhancing its supply chain and adopting competitive pricing strategies while advancing procurement techniques.
On a similar note, the firm’s net profits during the same period hit SR2.17 million, up from a net loss of SR198 million, which was recorded in the same period in 2022.
This rise is mainly linked to positive impact of the First Fix acquisition, in addition to the improvement in revenues and operating performance.
Moreover, Riyadh Steel Co. has also announced its annual financial results for 2023.
A bourse filing revealed that the firm’s net profit reached SR11.14 million in the period ending on Dec. 31, reflecting an increase of 118.8 percent compared to the corresponding period a year earlier.
The increase in net profit is primarily attributable to a reduction in the cost of revenue and secondarily to a rise in other income in comparison to the previous year.
Furthermore, Al-Baha Investment and Development Co. also announced its annual financial results for the period ending on Dec.31.
According to a Tadawul statement, the company’s net profit hit SR4.94 million in 2023, up from the net loss of SR8.09 million that was recorded in 2022.
The increase was owed to a 39 percent surge in the group’s revenues and reduced financing costs by 73 percent, among other reasons.
Saudi Arabia leads the charge toward energy transition: report
RIYADH: Saudi Arabia is emerging as a proactive leader, pioneering green initiatives to mitigate economic challenges posed by the transformation toward sustainability, according to the International Monetary Fund.
A recent report by the IMF highlighted the intricate dynamics at play and underscored the Gulf Cooperation Council and Saudi Arabia’s strategic positioning in this evolving scenario.
Titled “Key Challenges Faced by Fossil Fuel Exporters during the Energy Transition,” the study discussed climate change mitigation efforts in many fossil fuel exporting countries.
As Saudi Arabia and its GCC counterparts continue to lead the charge toward sustainability, they set a precedent for the global community.
By embracing green initiatives, investing in renewable energy, and fostering economic diversification, these nations are paving the way for a sustainable future, balancing economic prosperity with environmental responsibility.
The report emphasized that the Saudi Green Initiative launched in 2021 aimed at combating climate change and reducing carbon emissions.
It explained: “The Green Initiative is centered around three objectives, including targets for increasing the share of renewable energy in electricity generation up to 50 percent by 2030 and the deployment of circular carbon economy technologies, including carbon capture utilization and storage.”
Key challenges
The IMF stressed the need for economic diversification to effectively mitigate the impact of declining fossil fuel revenues.
Highlighting Saudi Arabia’s progress in economic diversification, the report explained: “The non-oil sector growth has accelerated since 2021, reaching 4.8 percent in 2022 spurred by strong domestic demand, especially in the wholesale, retail trade, construction, and transport sectors.”
Similarly, Bahrain, Qatar, and the UAE are diversifying their economies away from hydrocarbons, the study added.
In the UAE, non-hydrocarbon GDP was expected to grow by 5.3 percent in 2022, driven by tourism and FIFA World Cup impacts.
Progress on the Comprehensive Economic Partnership Agreements will further boost trade, attract foreign direct investment, and enhance integration with global value chains, according to the report.
The IMF highlighted that in Saudi Arabia, “the share of high-skilled jobs has increased to more than 40 percent in 2022, and female labor force participation doubled in four years to reach 37 percent in 2022.”
In its report, the Washington-based lender said the governments heavily reliant on revenues from fossil fuel exports face challenges in maintaining fiscal sustainability as these revenues decline.
“Countries with significant exposure to the fossil fuel industry may experience higher financial sector risks, including balance sheet effects, asset devaluation, and increased vulnerability to international market fluctuations,” it said.
The report added that transitioning away from fossil fuels may result in job losses in the fossil fuel industry, necessitating retraining programs and support for affected workers.
It called for structural reforms to address all the issues. “Accelerating structural reforms to diversify export bases and develop alternative industries is critical for mitigating the adverse macroeconomic effects of the energy transition,”the report said.
The IMF stressed the need for coordinated global efforts to overcome all these challenges. “Collaborative efforts can help ensure a smooth transition, mitigate transition costs, and support affected countries in diversifying their economies,” the report said.
New service at Jeddah port to boost Saudi-India trade
RIYADH: Saudi and Indian traders are set to benefit from Jeddah Islamic Port’s new service, bolstering trade connectivity between the nations.
The Saudi Ports Authority, also known as Mawani, on Thursday said that Unifeeder, a Danish logistics company, has introduced the “RGI” shipping service at the Saudi port. This initiative connects the Kingdom to Indian checkpoints, facilitating trade between the two nations and offering expedited and secure solutions for exporters and suppliers.
In a statement, Mawani affirmed that this undertaking showcases investors’ confidence in the Kingdom’s terminals, bolsters maritime transport and logistics services, and solidifies Jeddah Islamic Port’s status.
It added that the seaport is the Kingdom’s first dock for exports and imports, and the first re-export point in the Red Sea, with 62 multipurpose berths and a capacity of 130 million tonnes.
The new shipping service connects the Jeddah terminal to the ports of Mundra and Nhava Sheva in India, Jebel Ali in the UAE, and Sokhna in Egypt through regular weekly trips, with a capacity of up to 2,824 twenty-foot equivalent units, Mawani noted.