FTSE Russell promotes Saudi Arabia to emerging market status

Saudi Arabian authorities fast pace of change to implement market reforms

  • Saudi Arabia stocks to be included in phased timeline, beginning  March 2019
  • Saudi Arabia will be the largest market in the Middle East – c 2.7% of FTSE Emerging Index
  • Saudi Aramco IPO on Tadawul Exchange would increase weighting to 4.6%
  • Global institutional investors support the decision to promote Saudi Arabia

FTSE Russell has announced that Saudi Arabia will be promoted to Secondary Emerging Market status after the interim country classification review in March 2018. The FTSE Global Equity Index Series (FTSE GEIS) review country classifications with a transparent and thorough methodology. The review requires constant country classification research and analysis from FTSE Russell’s independent external advisory committees to classify countries as Developed, Advanced Emerging, Secondary Emerging or Frontier.

The Saudi government have reformed the Saudi market, making the required changes to meet the formal requirements to qualify in the FTSE GEIS. These changes include the enhancements to the Independent Custody Model (ICM) and opening the Saudi Arabia capital market to Qualified Foreign Investors (QFI).

Mark Makepeace, CEO, FTSE Russell, said:

“FTSE Russell is delighted to confirm that Saudi Arabia now meets the criteria for inclusion as a Secondary Emerging market in FTSE GEIS. Saudi Arabia is to be congratulated on the pace of the recent market reforms which are widely acknowledged as being positive for the country and capital markets development in the region. The demand from international investors for benchmark and analytic solutions to facilitate their investments into the Middle East region continues to grow. FTSE Russell is committed to remaining at the forefront of such requirements and providing innovative solutions for our global clients.”

His Excellency Mohammed El-Kuwaiz, Chairman, Capital Markets Authority, CMA, said:

“As part of Saudi Arabia’s Vision 2030, we are delighted to mark the country’s inclusion in the FTSE Russell global benchmarks. We have worked closely with index providers and the global investment community to ensure that our capital market reform programme sets the highest regulatory standards to meet the needs of both current and prospective investors. Saudi Arabia’s inclusion in global benchmarks will further strengthen our position as the largest market in the Middle East region and we will work closely with the market during the transition period.”

Khalid Al Hussan, Chief Executive Officer of Tadawul, said:

“Saudi Arabia’s promotion to Secondary Emerging market status in FTSE GEIS marks a significant moment in the development of our capital markets. We are proud of the achievements we have made to date to implement reforms and open our markets to international investors. We look forward to working with FTSE Russell to complete a smooth transition of our stocks into the global indexes over the coming months.”

FTSE Russell will include Saudi Arabian domestic stocks into FTSE GEIS from March 2019. Saudi will be the biggest Middle East market in the FTSE EMerging Index with an overall weighting of c. 2.7%.

Although the initial public offering (IPO) for Saudi Aramco is not yet confirmed, at the request of global institutional investors, FTSE approximated what the impact of a 5% IPO of Saudi Aramco located on the Saudi Tadawul Exchange would have on FTSE GEIS. The results showed an increase of the weighting to 4.6% within the FTSE Emerging Index. If the IPO were to be released, FTSE Russell would implement a phased introduction of the stock aligned with Saudi Arabia’s country inclusion timetable.