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.


Italy endorses China’s Belt and Road plan in first for a G7 nation

Updated 24 March 2019
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Italy endorses China’s Belt and Road plan in first for a G7 nation

ROME: Italy endorsed China’s ambitious “Belt and Road” infrastructure plan on Saturday, becoming the first major Western power to back the initiative to help revive the struggling Italian economy.
Saturday’s signing ceremony was the highlight of a three-day trip to Italy by Chinese President Xi Jinping, with the two nations boosting their ties at a time when the United States is locked in a trade war with China.
The rapprochement has angered Washington and alarmed some European Union allies, who fear it could see Beijing gain access to sensitive technologies and critical transport hubs.
Deputy Prime Minister Luigi Di Maio played down such concerns, telling reporters that although Rome remained fully committed to its Western partners, it had to put Italy first when it came to commercial ties.
“This is a very important day for us, a day when Made-in-Italy has won, Italy has won and Italian companies have won,” said Di Maio, who signed the memorandum of understanding on behalf of the Italian government in a Renaissance villa.
Taking advantage of Xi’s visit, Italian firms inked deals with Chinese counterparts worth an initial 2.5 billion euros ($2.8 billion). Di Maio said these contracts had a potential, future value of 20 billion euros.
The Belt and Road Initiative (BRI) lies at the heart of China’s foreign policy strategy and was incorporated into the ruling Communist Party constitution in 2017, reflecting Xi’s desire for his country to take a global leadership role.
The United States worries that it is designed to strengthen China’s military influence and could be used to spread technologies capable of spying on Western interests.
WARM WELCOME
Italy’s populist government, anxious to lift the economy out of its third recession in a decade, dismissed calls from Washington to shun the BRI and gave Xi the sort of red-carpet welcome normally reserved for its closest allies.
Some EU leaders also cautioned Italy this week against rushing into the arms of China, with French President Emmanuel Macron saying on Friday that relations with Beijing must not be based primarily on trade.
There was not even universal backing for the BRI agreement within Italy’s ruling coalition, with Deputy Prime Minister Matteo Salvini, who heads the far-right League, warning against the risk of China “colonialising” Italian markets.
Salvini did not meet Xi and declined to attend a state dinner held in honor of the visiting leader on Friday.
Di Maio, who leads the 5-Star Movement, says Italy is merely playing catch up, pointing to the fact that it exports significantly less to China than either Germany or France.
Italy registered a trade deficit with China of 17.6 billion euros last year and Di Maio said the aim was to eliminate the deficit as soon as possible.
After talks with Italian Prime Minister Giuseppe Conte and Di Maio in the morning, Xi flew to the Sicilian city Palermo for a private visit on Saturday afternoon.
He is due to head to Monte Carlo on Sunday before finishing his brief tour of Europe in France, where he is due to hold talks with Macron and German Chancellor Angela Merkel.