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Khalid Al Hussan, CEO of the Saudi Stock Exchange (Tadawul)
Strengthening the position of Saudi’s capital market through new products and improved infrastructure
Global Platform
Khalid Al Hussan, CEO of the Saudi Stock Exchange (Tadawul), spoke with OBG on the latest successes of Tadawul and the long-term objectives for the country’s capital markets. Recent offerings from Tadawul – notably the introduction of the parallel market Nomu and real estate investment trusts (REITs) – have shown positive results. This is a promising start for Saudi Arabia’s ultimate goal of having developed market infrastructure and being a key capital markets player on the global stage.
The competitive advantages of the Saudi capital market is its size, its liquidity. We are the largest stock exchange in the GCC and in the region, we are the 10th-largest emerging market index in the world and we are among the top 23 exchanges in the world. The Saudi Arabia economy is a G20 economy that has been stable and solid for a long period of time, and that by itself gives us, also as an exchange, an attractive element of advantage to promote the capital market.
Vision 2030 will change the way we do business, the way we look at things as a culture, as investors, as businessmen, as a company. It will open new eyes of looking at growth opportunities, change, taking risk, and looking at very important aspects of being among the international world.
If we look at the capital market in particular within that vision, what we want to achieve is the right position for the Saudi capital market within the exchange world map.
Vision of Growth
To support the growth of the capital market within Vision 2030 there are two elements to look at: local growth as well as international growth. When it comes to local growth the Saudi capital market has taken several initiatives. One of these came on February 2017 when we launched the Nomu, the parallel market, which basically caters for the growth of small and medium-sized enterprises. The second angle is by opening the market to international investors, and that by itself will bring several advantages to the market: one, more liquidity, so more access of funding for Saudi issuers through foreign investments; second, is adding more best practices, by having more institutional, stable, established financial institutions participating in our market. So better investor relations functions, better reporting – all of these activities are part of the growth story of the Saudi market and, ultimately, positioning the Saudi capital market on the map of global exchanges.
Opening up
On April 23, 2017 we launched the package of changes, and these changes were developed around requirements of the international investment community standards, which is basically moving from T+0 to T+2, enhanced custody framework, proper delivery versus payment, and being first in the region to offer security lending, borrowing and short selling. All of these changes will participate in opening up and attracting foreign investments to the Saudi markets.
A very important milestone with opening up the Saudi market is basically joining emerging market indices. We have also worked very closely with all global index providers, such MSCI, FTSE and S&P to understand in detail the requirements to join such indicies, and we think we are in a very good position as we speak.
Market outreach
One part of Vision 2030 and the National Transformation Plan is the privatisation activity the government is taking, and that by itself will add a key element to the Saudi stock exchange. Many of these companies will end up joining the exchange as part of the exercise, which will add more depth and liquidity to the stock exchange.
The Saudi Stock Exchange is in very good shape with regards to its technology infrastructure to adapt and include any type of product or issuer in the future. If we look at the initial public offering (IPO) pipeline in the Saudi market, today we can look at it from different angles. One is by IPOs or listings of REITs in the Nomu market and the main market. Overall the pipeline is very healthy, especially on REITs and Nomu, which are the most recent products that the Saudi capital market introduced. We are very optimistic that all three markets that we have will be able to generate good activity around IPOs.
We cannot stop where we are. We are setting up a developed market infrastructure to move towards implementing more sophisticated products that serve both institutional and individual investors in the Saudi market.
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