Saudi Arabia's Tadawul launches four equity indexes to attract investors

The new benchmarks will help investors broaden their strategies and capitalise on specific market opportunities

The launch of the indexes aims to stimulate growth in new products for investors, the Tadawul said. AFP

Saudi Arabia's Tadawul stock exchange has launched four new indexes as it seeks to attract local and international investors.

They are based on company size and initial public offering performance and “provide investors with a broad range of investment benchmarks while enabling institutions to offer new products to meet growing investor strategies”, the bourse said.

The Tadawul's large, medium and small cap index – collectively called Size Indices – also reflects the Saudi market's composition, the bourse said.

Large companies listed on the Tadawul account for 70 per cent of the free float market cap, medium companies 20 per cent and small companies 10 per cent.

The new Tadawul IPO Index will track the performance of companies listed on the main market in the last five years.

The purpose is to provide investors with a benchmark to evaluate the performance of their IPOs and “a unique opportunity to invest in new and rapidly growing companies”, the Tadawul said.

Mohammed Al Rumaih, chief executive of the Saudi Exchange, said the indexes would 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”.

Similar to the current Tadawul All Share Index, the maximum weight of any index constituent will be 15 per cent, ensuring a balanced representation of the entire market, the exchange added.

Saudi Arabia, the Arab world's biggest economy, has introduced a series of measures to attract international investors as part of efforts to draw foreign investment, diversify the economy and reduce its reliance on oil.

The Tadawul, which is among the top 10 global stock markets, became the third publicly traded regional stock exchange after the Dubai Financial Market and Boursa Kuwait when it was listed in December 2021.

The kingdom and the wider GCC region have seen a flurry of IPOs amid strong investor demand as economies rebound at a quicker pace from the coronavirus pandemic-induced slowdown and liquidity has been shored up by high oil prices.

The volume of IPOs on bourses in the Mena region climbed by 44 per cent annually in the second quarter of this year amid robust economic growth, according to global consultancy EY.

Growth in Mena IPO deals was driven by Saudi Arabia and the UAE, the top regional economies, EY said in a report earlier this month.

The Saudi Exchange, the biggest by market capitalisation in the Middle East, led the volume growth, with four listings on the main market that raised $800 million and seven IPOs on its parallel Nomu market securing $100 million in total proceeds.

Jamjoom Pharmaceuticals was the biggest IPO deal in the kingdom during the second quarter, raising $336 million, followed by First Milling Company, which raised $266.4 million.

Both Saudi companies offered 30 per cent of their share capital to the public in deals that were oversubscribed, according to EY data.

Last month, Lumi, an auto rental subsidiary of Seera Group Holding, announced plans to proceed with the listing of its 30 per cent stake on the Tadawul.

In December, Saudi Aramco Base Oil Company, or Luberef, began trading on the Arab world's largest stock market after raising $1.32 billion in its IPO.

The refining unit of oil major Saudi Aramco sold more than 50 million shares, about 29.7 per cent of the company's issued share capital, with the IPO drawing strong demand from investors in the kingdom and internationally.