S&P Dow Jones to upgrade Tadawul to emerging market next year

S&P Dow Jones Indices (S&P DJI) has said it will upgrade Saudi Arabia to emerging market status from a stand-alone market next year.

S&P Dow Jones previously estimated Saudi Arabia could ultimately have a 2.57 percent weighting in its emerging benchmark index.

FTSE Russell in March decided to upgrade Saudi Arabia to an emerging market in 2019, a move that is expected to attract about $5 billion of “passive” index-linked money to the stock market. Tadawul also won MSCI emerging market status in June during the global index compiler’s annual review for 2018, which could attract $10 billion of passive funds.

S&P’s impending upgrade comes in line with Saudi Arabia’s market reforms, including greater foreign accessibility and alignment with global standards, according to the S&P statement.

Some of Tadawul’s reforms include setting up a counterparty clearinghouse, which will be fully operational by the second half of 2019. The bourse also increased foreign ownership limit for QFI’s to 10 percent, improved independent custody rules, and required listed companies to apply IFRS standards.

“S&P DJI’s decision caps a period of tremendous progress for Tadawul and the Saudi capital market, which over the past six months have gained inclusion in all three of the preeminent global benchmark indices,” said Khalid Al Hussan, Tadawul CEO.

“It is a testament to growing investor confidence in the Saudi market and reflects the successful implementation of far-ranging capital market reforms in line with Vision 2030 that have further enhanced the accessibility of Tadawul to international investors”, he added.