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Saudi Tadawul to launch four Size Indices

PIF intends to divest stakes in its portfolio companies to bolster the economic transformation under Vision 2030 Reuters/Faisal Al Nasser
PIF intends to divest stakes in its portfolio companies to bolster the economic transformation under Vision 2030
  • Aim to increase investor numbers
  • Indices to serve as ‘benchmarks’
  • Many IPOs expected in next 18 months

The Saudi stock exchange (Tadawul) is launching four new indices based on company size and public listing performance.

The four Size Indices are the Tadawul Large Cap Index, Tadawul Medium Cap Index, Tadawul Small Cap Index and the Tadawul IPO Index.

The maximum weight for any single stock will be 15 percent, following Tadawul All Share Index rules. 

Large companies account for 70 percent of market capitalisation, while medium-sized companies account for 20 percent and small companies comprise 10 percent. 

The IPO Index will track the performance of companies listed on the main market within the past five years. 

The move is part of Saudi Arabia’s strategy to attract more local and international investors.

Tadawul hopes the indices will serve as benchmarks for investors that help the bourse grow further, CEO Mohammed Al Rumaih said.

Kuwait and Qatar have similar indice categories but Saudi Arabia is a much bigger market.

The QE index measures the 20 largest and most liquid stocks in the Qatar market, and the Boursa Kuwait Main Market 50 (BK Main 50) Index includes the top 50 liquid companies.

Arun Leslie John, chief market analyst at Century Financial in Dubai, said the increased segmentation would give investors more options for managing risk, including market mispricing.

Strong IPO activity in Saudi Arabia would make the IPO Index attractive, he said. 

“Considering the strong IPO pipeline in the region, the new Tadawul IPO Index can serve as a benchmark for the multitude of IPOs expected in the next 12-18 months.” 

Regional IPO activity has taken a hit over the past year, with the total value of listings falling 80 percent year on year, according to a report by EY IPO Eye analysts for the second quarter of 2023. 

The number of IPOs rose by 44 percent, dominated by listings from Saudi Arabia and the UAE. There were four listings on the Tadawul main market and seven on Tadawul’s Nomu parallel market.

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