Saudi Exchange (Tadawul) has launched four new indices designed to attract foreign and domestic investors, providing them with various investment benchmarks. This move also aims to empower financial institutions to roll out new products tailored to evolving investor preferences.
Looking at the bigger picture, this strategy is part of Saudi’s plan to expand its economy and reduce oil reliance.
The new indices are categorized according to company size and initial public offering (IPO) performance. Collectively known as Size Indices, they encompass large, medium, and small-cap indices, mirroring the market’s composition.
Large enterprises constitute 70 percent of the free float market capitalization while medium-sized firms contribute 20 percent. Making up the remaining 10 percent are small enterprises.
Tadawul IPO Index
The Saudi bourse plans to monitor the performance of companies listed on the main market over the past five years via the Tadawul IPO Index. This index will also provide investors with a benchmark to gauge the performance of their IPOs. It will further allow them to look into opportunities for investing in emerging and swiftly expanding enterprises.
The maximum weighting for any index constituent will be capped at 15 percent, similar to the current Tadawul All Share Index (TASI). This ensures an equitable representation of the entire market.
Read: Saudi logistics firm SAL to go public as owners list 30 percent stake
Balanced representation
These newly unveiled indices act as vital reference points for specialized investment products across various market segments.
“By introducing size indices that reflect the market’s composition, we aim to provide a balanced representation of the market and offer investors a diverse range of investment opportunities. Furthermore, the Tadawul IPO Index will enable investors to participate in the growth potential of new and rapidly expanding companies listed on the Main Market,” stated Mohammed Al Rumaih, chief executive officer of Tadawul.
“We believe these indices will serve as valuable benchmarks for investment products and will allow both local and foreign investors to access and benefit from our dynamic and growing capital market,” he further expressed.
Saudi Arabia remains at the forefront of the Middle East and North Africa (MENA) IPO activity. It contributed 11 out of the total 13 listings in the region during the second quarter (Q2) of 2023. This is according to a report from global consulting firm Ernst & Young (EY).
EY’s MENA IPO Eye report shows that the region’s 13 IPO listings generated a combined $1.8 bn in proceeds. MENA saw a 44 percent increase in the number of offerings compared to Q2 2022.
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