Saudi exchange boss sees more IPOs

Foreign investment is expected to flood into the market from 2019. (Reuters)
Updated 06 September 2018
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Saudi exchange boss sees more IPOs

  • Authorities are working on several initiatives including a package of incentives for local companies to list
  • Launch of stock index futures should bring an influx of money from overseas

RIYADH: A package of incentives is to be offered to Saudi companies to list on the Riyadh-based stock market, with more initial public offerings (IPOs) expected next year, according to the CEO of the exchange. The Saudi Stock Exchange, known as Tadawul, expects IPOs to pick up next year, its chief Khalid Al-Hussan told Reuters, while the launch of stock index futures should bring an influx of money from overseas.
Al-Hussan said authorities were working on several initiatives including a package of incentives for local companies to list.
So far this year, the Tadawul — which has a capitalization of around $490 billion — has seen one IPO on the main market and one on the parallel Nomu market.
“The application pipeline of new listings, both in Nomu and the main market today, is very healthy,” Al-Hussan told Reuters.
He was speaking as the Tadawul announced the signing of an agreement with global index provider MSCI to jointly launch a tradable index later this year.
The move is set to serve as the basis for investment instruments including derivatives and exchange-traded funds (ETFs), executives said in Riyadh.
The index will be open to both domestic and international investors, and follows the announcement that the Tadawul is to be upgraded by MSCI to “emerging market” status, in a move tipped to see billions of dollars of foreign investment flood into the market from 2019.
“The joint tradable index will be available in the fourth quarter of 2018,” Al-Hussan told reporters.
“The establishment of this index provides a platform for the development of futures traded and other traded products, in the financial market.”
MSCI said that the index would be based on the broader MSCI Saudi Arabia index series, part of the MSCI Emerging Markets Index.
Tadawul said in a separate statement it would introduce exchange-traded derivatives in the first half of 2019, Reuters reported.
“The creation of the joint tradable index provides a strong foundation for the development of index futures and other exchange-traded products,” said Al-Hussan.
“As the Saudi market is fully integrated into global emerging market indices, including MSCI, the launch of an index will pave the way for ETFs and other products that enable investors to broaden exposure and diversify ... risk while enhancing the overall efficiency of the market.
“The creation of the joint tradable index will be a milestone for launch of financial products, while Tadawul aspires to achieve more.”
He also pointed to the development of the Saudi exchange ahead of an expected initial public offering in energy giant Saudi Aramco, which is set to be the world’s largest listing.
“I think the Saudi stock exchange will continue to develop its markets to be ready for Aramco and other issues,” Al-Hussan added.
Henry A. Fernandez, MSCI’s chairman and chief executive officer, said that Saudi Arabia had gone through a “remarkably rapid period of change” in the past few years.
The Tadawul and MSCI will be working closely in a “win-win” situation, he added.
“This joint index is possible as a result of the Kingdom’s adoption of international standards and desire to create additional investment opportunities for domestic and international investors,” said Fernandez.
“The jointly launched index is a result of the Saudi market applying international standards and desire to provide additional investment opportunities to investors.”
Fernandez added that the composition of new MSCI-Saudi tradable index is not yet fixed, but said that “the index provider will publish standards later.”
The news follows a string of reforms on the Saudi market, including the easing on restrictions on foreign ownership of companies.


Bitcoin craze hits Iran as US sanctions squeeze weak economy

Updated 18 July 2019
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Bitcoin craze hits Iran as US sanctions squeeze weak economy

  • Some Iranian officials worry that “mining” is abusing the subsidized electricity
  • Iranian Bitcoin miners are purchasing more affordable Chinese ready-made computers

TEHRAN: Iranians feeling the squeeze from US sanctions targeting the Islamic Republic’s ailing economy are increasingly turning to such digital currencies as Bitcoin to make money, prompting alarm in and out of the country.
In Iran, some government officials worry that the energy-hungry process of “mining” Bitcoin is abusing Iran’s system of subsidized electricity; in the United States, some observers have warned that cryptocurrencies could be used to bypass the Trump administration’s sanctions targeting Iran over its unraveling nuclear deal with world powers.
The Bitcoin craze has made the front pages of Iranian newspapers and been discussed by some of the country’s top ayatollahs, and there have been televised police raids on hidden computer farms set up to bring in money by “mining” the currency.
Like other digital currencies, Bitcoin is an alternative to money printed by sovereign governments around the world. Unlike those bills, however, cryptocurrencies are not controlled by a central bank. Bitcoin and other digital currencies like it trade globally in highly speculative markets without any backing from a physical entity.
As a result, computers around the world “mine” the data, meaning they use highly complex algorithms to verify transactions. The verified transactions, called blocks, are then added to a public record, known as the blockchain. Any time “miners” add a new block to the blockchain, they are rewarded with a payment in bitcoins.
To work, the expensive specialized computers require a lot of electricity to power their processors and to keep them cool. In Iran, “miners” have an edge because electricity is cheap thanks to longtime government subsidies. “Miners” also buy cheaper Chinese ready-made computers to do the work.
But the constant raids and authorities’ conflicting statements on the issue have Bitcoin “miners” in Iran incredibly leery of being identified. Those contacted by The Associated Press refused to speak about their work or to say how much they earn from their “mining.”
But they acknowledge they do this to make some money at a time when Iran’s currency, the rial, tumbled from 32,000 rials to $1 at the time of the 2015 nuclear deal, to around 120,000 rials to $1 now.
“It is clear that here has turned into a heaven for ‘miners,’” Mohammad Javad Azari Jahromi, Iran’s minister for information and communications technology, recently told AP in an interview. “The business of ‘mining’ is not forbidden in law but the government and the Central Bank have ordered the Customs Bureau to ban the import of (mining machines) until new regulations are introduced.”
Ali Bakhshi, the head of the Iran Electrical Industry Syndicate, said earlier this month that the country’s Energy Ministry likely would boost costs for Bitcoin “miners” to 7 cents for each kilowatt of electricity they consume, a massive increase from the current half-cent but still almost half the cost of electricity in the United States, according to the semi-official Fars news agency.
Still, there are concerns, especially among Iran’s religious leaders, that people might try to circumvent paying extra for the electricity as well as using digital currency to hide or move money illicitly.
Tabnak, a hard-line news website associated with a former commander of the country’s paramilitary Revolutionary Guard, quoted three ayatollahs describing Bitcoin as either problematic or “haram,” meaning forbidden. Islam prescribes strict rules about finance.
But Jahromi said clerics became more receptive to the idea after his staff briefed them that Bitcoin had a value in the real world, which is required under Islamic finance. Islamic finance also prohibits gambling, the payment of interest and misleading others.
“Some of our top clerics have issued fatwas that say Bitcoin is money without a reserve, that it is rejected by Islamic and cybercurrencies are haram,” Jahromi said. “When we explain to them this is not a currency but an asset, they change their mind.”
Iran has tried to keep its economic situation in check by controlling foreign currency rates and cutting down on those moving their money from the rial to other currencies, including Bitcoin. Last year, the semi-official Mehr news agency quoted Mohammad Reza Pour-Ebrahimi, the head of the Iranian parliament’s economic commission, as suggesting that about $2.5 billion left Iran through digital currency purchases. He did not elaborate and authorities have not discussed it since.
The US, meanwhile, has been keeping a close watch on Iranians holding bitcoins. In November, a federal grand jury in Newark, New Jersey, accused two Iranian men of hacking and holding hostage computer systems of over 200 American entities to extort them for Bitcoin, including the cities of Newark and Atlanta.
“As Iran becomes increasingly isolated and desperate for access to US dollars, it is vital that virtual currency exchanges, peer-to-peer exchangers and other providers of digital currency services harden their networks against these illicit schemes,” said Sigal Mandelker, Treasury’s undersecretary for terrorism and financial intelligence.
Not so, said Jahromi.
“Cybercurrencies are effective in bypassing sanctions when it comes to small transactions, but we do not see any special impact in them as far as mega-transactions are concerned,” he said. “We cannot use them to go around international monetary mechanisms.”