RIYADH: The Saudi Stock Exchange (Tadawul) expects additional passive funds’ inflows worth $3 billion from the remaining phases of inclusion in the FTSE Russell emerging market index starting in September, its chairwoman said.
The Middle East’s largest bourse is also expected to launch the first exchange-traded derivative product — an index futures contract based on the MSCI Tadawul 30 Index — in the fourth quarter of 2019, Sarah Al-Suhaimi said.
The kingdom opened its stock market to foreign investors in 2015. It has since introduced a raft of reforms to make it attractive to foreign investors and issuers and to expand its institutional investor base, as part of an ambitious plan to diversify the economy away from hydrocarbons.
The Saudi inclusion in emerging markets indices has generated foreign inflows worth billions of dollars since the start of the year, and is expected to facilitate Riyadh’s plans to sell about 5 percent of its oil giant Aramco in an IPO and reinvest the proceeds in new industries.
Inflows of foreign funds will help absorb the huge IPO, especially with an increasing likelihood of a domestic listing on the Riyadh bourse followed by a later international offering.
In August, the Saudi exchange completed the second and final phase of joining the MSCI Emerging Markets Index, raising its weight on the closely-monitored index to 2.8 percent.
“Since the beginning of this year, foreign investors have traded more than $65 billion and have been net buyers of more than $20 billion of Tadawul-listed shares through August 29,” Suhaimi said in an emailed response to Reuters inquiries.
Suhaimi said the number of qualified foreign investors (QFIs) has “grown exponentially” by 200 percent year-to-date, reaching more than 1,300 and is set to grow further by the end of 2019.
“The additional passive inflows from the remaining tranches of FTSE inclusion is expected to be around $3 billion,” she said.
“Tadawul is in the final implementation phase of establishing a Derivatives Market and is actively working on market readiness from a technology, trading and business perspective. We expect to launch the first exchange-traded derivative product – an index futures contract based on the MSCI Tadawul 30 Index — in the fourth quarter of 2019.”
She said the Saudi market will continue to be of interest to international investors despite heightened volatility in global markets due to trade conflicts and political concerns.
“Foreign investors ownership percentage is now at 8.3 percent, that is 76 percent growth year-to-date. Additionally, Saudi market performance year-to-date has been positive at 4.8 percent growth while FTSE EM only grew by 1.76 percent and MSCI EM declined by -0.15 percent for the same period,” she said.
Saudi Tadawul expects $3bn additional inflows from FTSE inclusion: chairwoman
Saudi Tadawul expects $3bn additional inflows from FTSE inclusion: chairwoman
Global trade isn’t deglobalizing — it’s reshuffling, Harvard economist says
ALULA: Global trade is not retreating into deglobalization despite geopolitical shocks, but is instead undergoing a structural reshuffling led by US-China tensions, according to Harvard University economist Pol Antras.
Presenting research at the AlUla Emerging Market Economies Conference, Antras said there is no evidence that countries are systematically turning inward. Instead, trade flows are being redirected across markets, creating winners and losers depending on export structure and exposure to Chinese competition.
This comes as debate intensifies over whether supply-chain disruptions, industrial policy and rising trade barriers signal the end of globalization after decades of expansion.
Speaking to Arab News on the sidelines of the event, Antras said: “I think the right way to view it is more a reorganization, where things are moving from some countries to others rather than a general trend where countries are becoming more inward looking, in a sense of producers selling more of their stuff domestically than internationally, or consumers buying more domestic products than foreign products.”
He said a change of that scale has not yet happened, which is important to recognize when navigating the reshuffling — a shift his research shows is driven by Chinese producers redirecting sales away from the US toward other economies.
He added that countries are affected differently, but highlighted that the Kingdom’s position is relatively positive, stating: “In the case of Saudi Arabia, for instance, its export structure, what it exports, is very different than what China exports, so in that sense it’s better positioned so suffer less negative consequences of recent events.”
He went on to say that economies likely to be more negatively impacted than the Kingdom would be those with more producers in sectors exposed to Chinese competition. He added that while many countries may feel inclined to follow the United States’ footsteps by implementing their own tariffs, he would advise against such a move.
Instead, he pointed to supporting producers facing the shock as a better way to protect and prepare economies, describing it as a key step toward building resilience — a view Professor Antras underscored as fundamental.
Elaborating on the Kingdom’s position amid rising tensions and structural reorganization, he said Saudi Arabia holds a relative advantage in its economic framework.
“Saudi Arabia should not be too worried about facing increased competitive pressures in selling its exports to other markets, by its nature. On the other hand, there is a benefit of the current situation, which is when Chinese producers find it hard to sell in US market, they naturally pivot to other markets.”
He said that pivot could benefit importing economies, including Saudi Arabia, by lowering Chinese export prices. The shift could increase the Kingdom’s import volumes from China while easing cost pressures for domestic producers.
