Nasdaq Dubai to launch Saudi Arabian futures later this year

The Kingdom’s stock exchange, the Tadawul, has announced its intention to enable futures and other derivatives trading. (AFP)
Updated 20 May 2018
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Nasdaq Dubai to launch Saudi Arabian futures later this year

  • The move will allow global investors to trade shares in Saudi Arabian listed companies via contracts to buy or sell shares at a set price in the future
  • The Kingdom’s stock exchange, the Tadawul, has announced its intention to enable futures and other derivatives trading

DUBAI: Nasdaq Dubai, the UAE’s international stock exchange, is to launch futures trading in Saudi Arabian quoted companies before the end of this year, Arab News can reveal.
The move will allow global investors to trade shares in Saudi Arabian listed companies via contracts to buy or sell shares at a set price in the future, and is expected to add to the attraction of the Kingdom’s financial markets among international investors. 
It will be the first time Saudi stocks can be traded in derivative form.
Hamed Ali, chief executive of the Dubai-based exchange, said: “We are delighted to provide investors with an exciting new route to gain exposure to the Kingdom’s dynamic and rapidly expanding equity markets. What we’ve seen happen in Saudi Arabia is impressive reform, progression and change, and there is a lot of regional and international interest in the stock markets there. 
“This is good news for our two markets, and a good step in building a stronger bridge between them,” he added.
Ali has been involved in talks about the initiative for some time with relevant market players in the Kingdom. 
“The framework we have built for trading and clearing Saudi futures is based on intensive consultations with regional and international market participants, including brokers and potential 
investors.  Our futures will provide further 
impetus to invest in Saudi Arabian capital markets and help develop new links with market participants,” he added.
The Kingdom’s stock exchange, the Tadawul, has announced its intention to enable futures and other derivatives trading, but its plans are still thought to be some way from implementation. Earlier this month it announced the setting up of an independent clearing house, essential to pave the way for derivatives trades.
The launch of futures by Nasdaq Dubai comes at a busy time for markets in the Kingdom. The Tadawul’s headline TASI index is among the best performing in the world, having risen 11 percent so far this year. 
Index provider MSCI is widely expected to include KSA stocks in its widely tracked emerging markets index from next year, opening the bourse up to significant inflows from foreign investors. 
Such investors are also eagerly waiting for a raft of domestic privatizations that could further boost the markets later this year and beyond. 
The most eagerly anticipated is the initial public offering (IPO) of a minority stake in oil major Saudi Aramco, which could be the biggest IPO in history. Asked about the listing, Ali said: “We would definitely offer single stock futures in it.”
Nasdaq’s Saudi futures market will commence in the third quarter of the current year, offering contracts on some of the Kingdom’s biggest stocks by market capitalization and liquidity, including some of the Middle East’s largest businesses active in sectors such as petrochemicals, real estate, banking and transport.
The futures contracts will give investors new hedging tools to take long and short positions on the companies, at a time when international investor interest in the Kingdom’s stock market is increasing rapidly, Nasdaq believes.
The Nasdaq futures market currently operates with leading Gulf brokerages as members, and two active market makers on the UAE contracts.

 

More market participants are preparing to join as Nasdaq Dubai adds the KSA single stock futures and expands its 
derivatives platform in phases, to include futures based on stocks and indices of various exchanges in the Middle East and North Africa, as well as options, Nasdaq said. More brokers are expected to join the Nasdaq platform as the trade in Saudi futures takes off, including some from Saudi Arabia.
Nasdaq Dubai launched UAE futures trading in 2016 with single stock futures on seven UAE-listed companies. That number has since increased to 17 and last February the exchange added futures on Dubai Financial Market’s DFMGI share index, as well as the ADSMI index of Abu Dhabi Securities Exchange. Futures on MSCI’s UAE index will be added soon under a license agreement signed with MSCI.
“We are really pleased with the futures market performance. Volumes have been steady, but, of course, they just reflect the underlying performance of the market,” Ali said.
Futures and other derivative products are common instruments in Western and other financial markets, and are regarded as key mechanisms to enhance market 
liquidity, but have been slower to gain 
acceptance in the Middle East.  
The futures move by Nasdaq Dubai is a sign of increasing co-operation between the UAE and Saudi stock exchanges, as well as others in the Gulf Co-operation Council region.
Sarah Al-Suhaimi, chairperson of the Tadawul, said recently that she wanted to make the Tadawul the “dominant” exchange in the region, and that discussions had taken place between exchange policymakers and regulators with a view to enabling common listing rules and dual listings of regional companies.
“Can there be other things we can do 
together with Riyadh? Yes, of course, there are lots of things, but we need to agree a framework,” Ali said.
“We will be looking at more products in the future. This is just a starting point,” he added.

Decoder

Futures Contracts

Futures contracts allow investors to buy shares (or other assets) at an agreed price for delivery (and payment) at a later date. They are a common tool used to hedge risk, by limiting exposure to price fluctuations.


UK’s Quercus pulls plug on $570 mln Iran solar plant as sanctions bite

Updated 14 August 2018
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UK’s Quercus pulls plug on $570 mln Iran solar plant as sanctions bite

  • Quercus said it will halt the construction of a 500 million euro ($570 million) solar power plant in Iran
  • Iran has been trying to increase the share of renewable-produced electricity in its energy mix

OSLO: A British renewable energy investor Quercus said it will halt the construction of a 500 million euro ($570 million) solar power plant in Iran due to recently imposed US sanctions on Tehran.
The solar plant in Iran would have been the first renewable energy investment outside Europe by Quercus and the world’s sixth largest, with a 600 megawatt (MW) capacity.
Iran has been trying to increase the share of renewable-produced electricity in its energy mix, partly due to air pollution and to meet international commitments, hoping to have about 5 gigawatt in renewables installed by 2022.
In June, before the US-imposed sanctions, more than 250 companies had signed agreements to add and sell power from about 4 gigawatt of new renewables in the country, which has only 602 MW installed, Iranian energy ministry data showed.
Washington reimposed sanctions last week after pulling out of a 2015 international deal aimed at curbing Iran’s nuclear program in return for an easing of economic sanctions.
US president Donald Trump has also threatened to penalize companies that continue to operate in Iran, which led banks and many companies around the world to scale back their dealings with Tehran.
“Following the US sanctions on Iran, we have decided to cease all activities in the country, including our 600 MW project. We will continue to monitor the situation closely,” Quercus chief executive Diego Biasi said in an email on Tuesday.
The firm will continue to monitor the situation closely, said Biasi, who declined to comment further.
Last year Quercus said it would set up a project company and sell shares via a private placement after attracting interest from private and institutional investors, including sovereign wealth funds.
Construction was expected to take three years, with each 100 MW standalone lot becoming operational and connecting to the grid every six months.

SANCTIONS BITE
Independently-owned Quercus has a portfolio of around 28 renewable energy plants and 235 MW of installed capacity.
The firm, founded by Biasi and Simone Borla in 2010, controls five investment funds and has a network of “highly regarded external partners,” it says on its website.
The 600 MW plant it aimed to construct in Iran would be the firm’s largest investment. Quercus declined to comment on the details of its decision to cease the plan and on any financial losses that could result from it.
Fearing the consequences of the US embargo, a string of European companies have recently announced they would scale back their business in Iran.
On Tuesday, German engineering group Bilfinger, said it did not plan to sign any new business in the country, while automotive supplier Duerr on Aug. 11 said it had halted activities in Iran.
Another project, planned by Norway’s Saga Energy, which said last October it aimed to build 2 GW of new solar energy capacity in Iran and to start construction by the end of 2018, has also stalled.
Saga Energy’s chief of operations Rune Haaland told Reuters it was still working on getting the funding, which is more complicated since recent developments, and although it aimed to push on with its plans, construction could be delayed. ($1 = 0.8773 euros)