Saudi bourse signs up S&P indexes

Standard & Poor's (S&P) will create indexes for the Saudi stock exchange (Tadawul) to boost the foreign exposure of the Arab world's largest bourse, Tadawul said on Wednesday, two weeks after MSCI threatened to ban it from its indexes.

"The indexes ... can be used as the underlying for third party investment products such as mutual funds, ETFs and other financial products that enable investors in Saudi and abroad to participate in the performance of the Saudi stock market," Tadawul said in a statement posted on its website.

"This means that the Saudi market will get increased exposure to investors around the world," it added.

The agreement follows a warning earlier this month by index maker MSCI that it could scrap all indexes containing securities listed on Tadawul and replace these with indexes excluding Saudi Arabia, following a dispute over licensing rights.

Analysts said an MSCI ban would have little impact on Saudi stocks because few shares are foreign-owned. In July, non-Saudi investors accounted for 3.85 per cent of the turnover on Tadawul, according to the bourse's website.

Non-Arab investors claimed a 0.75 per cent share.

Saudi-registered foreign companies can invest in Saudi stocks under their own name, as can foreign residents of Saudi Arabia and Gulf Cooperation Council (GCC) nationals. But non-GCC investors, both individual and institutional, who are located outside Saudi Arabia can only invest in Saudi stocks through swap agreements.

The disagreement with MSCI centred around Tadawul's desire to have the option of vetoing MSCI product licences that include Saudi stocks.