FOCUS: Could you give us a bit of background about your exchange?
TADAWUL: Formation of a regulated market for trading began in the early 1980’s. Saudi Arabian Monetary Agency (SAMA) was charged with regulating and monitoring market activities until the Capital Market Law issued in July 2003, and the Authority (CMA) was established in 2004. The CMA is the sole regulator and supervisor of the capital market, it issues the required rules and regulations to protect investors and ensure fairness and efficiency in the market. The Saudi Stock Exchange (Tadawul) was incorporated in 2007 as a for profit joint stock company.
Tadawul today is the largest and most liquid stock exchange in the entire Middle East North Africa region, with a market capitalization of USD 373.42 billion (at end of 2012) and a daily average traded value of USD 2.05 billion at end of 2012, Tadawul accounts for over 50% of the entire GCC equity market and 90% of the traded value in equities. As local wealth and liquidity continue to rise, Tadawul size, liquidity and performance have enabled an efficient and effective mobilization of capital and investment in the Saudi economy.
Within the last five years 47 companies have listed on Tadawul, raising a total of USD 12.48 billion in IPO capital. Tadawul also lists ETFs, bonds and Sukuk.
Over 5 million investors are registered at Tadawul depository. Investors transact in the market through any of the 30 licensed brokerage firms (exchange members). In 2012, over 42 million trades were executed on Tadawul (a daily average exceeding 167,000 trades). Tadawul provides T+0 settlement of all executed trades. The robust technology employed at Tadawul ensures instantaneous transfer of ownership.
Market data from Tadawul is distributed by more than 37 local and international data vendors. Tadawul also licenses use of its data to many global index providers including S&P DJ, MSCI, Russell, FTSE, …etc.
FOCUS: How active are foreign investors in your exchange? How accessible is your market?
TADAWUL: Currently, non-resident foreign investors can access the market through equity swaps, mutual funds and exchange-traded funds via member trading firms. About 90% of current market activity is dominated by retail local, GCC and resident investors.
The exchange hosts a diverse range of listed companies – 160 in all –. The Market diversity gives investors exposure to the economic performance of many dimensions of the Saudi economy. With 37 of the listed companies having a free-float capitalization above USD 1 billion and 54 listed companies having a free-float above USD 500 million as of May 2013, diverse investment can be accommodated through stocks with deep liquidity.
The Market sector classifications reflect the main activities of the listed companies, covering 15 different sectors including petrochemicals, banks and financials, cement, industrials, energy and utilities, building and construction, insurance, retail, food and agriculture.
FOCUS: What new project/product are you currently working on?
Tadawul has to have a key role in regional integration of markets. We have been in discussions with a number of exchanges for development of joint products and indexes.
TADAWUL: Tadawul acts as the trading platform and central depository not only for equities but also corporate bonds, Sukuk, and ETFs. Tadawul also is the only licensed registrar for listed securities.
We are currently working on a number of initiatives to increase the diversity of our market such as listing tradable rights, listing of REITs, new classes of ETFs, warrants and cross listing. We are also engaged with the CMA on a major undertaking to develop the fixed income market.
On the Depository and Asset Services, we continue to develop the Tadawulaty services to investors and listed companies. Via Tadawulaty on-line services, investors can access consolidated reporting of holdings in the market, receive dividend alerts and vote on general assemblies of listed companies. Tadawul also provides registrar services to unlisted companies.
Tadawul has plans to deepen its offerings of market data products by introducing analytics, reference data, and index products.
In June 2013 Tadawul will launch a new disclosure system using XBRL. This will replace the current web-based disclosure system.
FOCUS: What are the challenges you see in your market today and in the future?
TADAWUL: The two main challenges for Tadawul focus around diversification of products & services; and development of institutional participation in the market.
It is very important that we offer our investors different asset classes and means for them to hedge their risks in the market. Sukuk, ETFs, REITs could be developed to become viable alternatives for investors.
On the investor base side, today 90% of activity comes from individuals. That’s why it is important to develop the institutional activity in the Saudi market. This could be through increasing the shares of existing investors such as mutual funds and pension funds. Additionally, attracting new types of institutional investors to the market.
FOCUS: How do you assess your exchange’s position at a time of increased globalization?
TADAWUL: Globalization has increased rapidly in recent years. It has been driven by technological advances and the reduced cost of making transactions (exchanges) locally and across borders as well as the increased mobility of capital.
The GCC region remains one of the few regions in the world that is seeing continuous growth and is gaining investor attraction. With its current positioning as the largest, most liquid, and most attractive IPO market in the region, Tadawul has to have a key role in regional integration of markets. We have been in discussions with a number of exchanges for development of joint products and indexes.