Non-Saudi Gulf companies get ready to joint list on Tadawul

Khalid Al-Hussan, the Tadawul exchange’s chief executive, spoke to Arab News on the sidelines of the Financial Sector Conference in Riyadh. (Supplied)
Updated 25 April 2019
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Non-Saudi Gulf companies get ready to joint list on Tadawul

  • Two companies, from UAE and Bahrain, about to submit documentation, bourse CEO tells Arab News
  • Joint listings for other Gulf stocks would be an important step in Tadawul’s ambition to be the dominant stock market in the region

RIYADH: Tadawul, the Saudi Arabian stock exchange, is on the verge of announcing the first ever joint-listings of companies from other Gulf countries in a move that further illustrates the growing regional power of the market.

Khalid Al-Hussan, the exchange’s chief executive, told Arab News on the sidelines of the Financial Sector Conference in Riyadh that two companies — one from the UAE and one from Bahrain — are about to submit the necessary documentation to enable their listing in Riyadh. He declined to identify them.

“Two companies are in advanced discussions and are about to submit their files,” he said. The final decision on their listing rests with the regulator Capital Markets Authority, but Al-Hussan has made no secret of his desire to get non-Saudi companies from the Gulf Cooperation Council listed on the Riyadh market.

“We are an important regional platform and we can complement secure access to capital and the liquidity they lack in their home markets,” Al-Hussan said, adding that Tadawul was speaking to several other corporates in the region to gauge their interest.

Joint listings for other Gulf stocks would be an important step in Tadawul’s ambition to be the dominant stock market in the region. Al-Hussan is also planning Gulf-wide initiatives in other areas of securities trading, like settlement and clearing.

“Tadawul can play an important role in post-trade business, because of its size and liquidity. Running a clearing house is very expensive,” he said. Tadawul is already in talks with the Abu Dhabi Securities Exchange and Bahrain Bourse about the possibility of them using Tadawul for clearance and settlement activities.

“They are assessing whether Saudi infrastructure is right for them,” Al-Hussan said. There have been no talks yet with Dubai.

We are an important regional platform and we can complement secure access to capital and the liquidity they lack in their home markets.

Khalid Al-Hussan

News of Tadawul’s growing regional ambitions comes as the Riyadh market continues to reap benefit from the ongoing upgrades to emerging markets status and inclusion in the main indices.

The next tranche of Saudi stocks get included in the FTSE-Russell index next week, while the first tranche under the MSCI upgrade takes place at the end of next month.

“We’re up 18 percent since the beginning of the year, and I don’t think you’ll find many emerging markets performing better than that,” Al-Hussan said of the Tadawul index’s performance.

He said that an influx of foreign investors was a very important reason for the strength of Saudi markets. “It is not just my feeling, it is the facts. Foreign investment is positive every day. Cash inflows are positive and increasing each week,” Al-Hussan said.

The market is also finessing preparations for the introduction of derivatives trading, which is likely to happen in the second half of the year. Al-Hussan said that all the necessary regulations were in place to allow trading in derivatives — securities based on future values of stocks — and that it was awaiting final regulatory approval.

 

 “We are still waiting on the readiness of market traders to actually trade derivatives, and on the readiness of local investors for them. They have to be well informed,” he said.

The Nasdaq Dubai exchange in the UAE already has a platform for derivatives trading in Saudi equities, but Al-Hussan said: “It is very hard for a regional exchange to compete with the domestic one, especially if it does not have much liquidity.”

In the course of the Financial Sector Conference, tech firm Al Moammar Information Systems Company began trading on Tadawul, and marketing is well underway for the forthcoming initial public offering of Arabian Centers by the Fawaz Alhokair Group.

Tadawul also announced a number of “enhancements” to the fee structure of the bond markets, including reducing commissions and waving others, to enhance the competitiveness of debt instruments on the exchange.

FASTFACTS

18.5%

Rise in the Tadawul All Share Index so far this year


Regulators fail to set date for Boeing 737 MAX return to service

Updated 24 May 2019
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Regulators fail to set date for Boeing 737 MAX return to service

  • ‘The only timetable is to make sure the aircraft is safe to fly’
  • Boeing had held off submitting a proposed software fix for review after the US Federal Aviation Administration raised additional questions

FORT WORTH, United States: Civil aviation regulators from around the world failed to make a determination Thursday on when Boeing’s popular 737 MAX aircraft can return to the skies after being grounded following two deadly crashes.
“The only timetable is to make sure the aircraft is safe to fly,” Daniel Elwell, acting head of the US Federal Aviation Administration, said at the conclusion of the day-long meeting in Texas.
There was “enthusiastic agreement to continue the dialogue,” he said, but acknowledged that “each country has to make its own decision.”
“If they unground relatively close to when we unground I think it would help with public confidence,” Elwell said, while adding that: “We can’t be driven by some arbitrary timeline.”
Until the 737 MAX crashes in Ethiopia in March and Indonesia in October which left a combined 346 people dead, common practice was that air regulators would follow the assessment of the agency overseeing the model, in this case the FAA.
On Wednesday, Elwell threw cold water on hopes of a speedy resolution, after revealing Boeing had held off submitting a proposed software fix for review after his agency raised additional questions.
“Once we have addressed the information requests from the FAA, we will be ready to schedule a certification test flight and submit final certification documentation,” Boeing said in a statement.
Investigators have focused on the MAX’s anti-stall Maneuvering Characteristics Augmentation System in inquiries into the two deadly crashes.
Boeing last week said the MCAS update was ready for the certification process, and US airlines were hoping the planes could be back in the skies in time for part of the summer travel season.
But Elwell on Thursday said the process could take one month, two months or longer.
“It is all determined by what we find in our analysis of the application,” he said on CNBC.
Once Boeing has submitted all documentation, the FAA will conduct a test flight and detailed analysis to evaluate the safety of the software.
Richard Aboulafia, an aviation analyst at Teal Group, said Boeing wants to avoid having to repeat the process.
“There’s a lot at stake in terms of the first impression by the world’s regulators,” he told AFP.
US air carriers that operate the 737 MAX, including American Airlines, Southwest and United, have said they hope to have the planes flying again by mid-August at the latest.
The FAA’s reputation has taken a beating since the March crash, and faced accusations of an overly cozy relationship with the aviation giant. Other aviation authorities now appear less likely to follow the US agency.
Michel Merluzeau of Air Insight Research, said American officials could end the 737 MAX’s grounding toward the end of summer, with authorities in other countries following suit “several months” later.
“We’re headed for a return to service that could drag on in time,” he said.
Elwell said regulators also have yet to decide on changes to pilot training once the adjustments have been approved.
The United States has differed with a number of countries on this issue, including Canada. Washington believes training on computers or tablets is sufficient for seasoned pilots but Ottawa wants to require training on flight simulators.
Transport Canada said it had “full confidence” in the FAA and its processes, but did not rule out the possibility that pilots of 737 MAX jets would be required to receive simulator training.
Nicholas Robinson, director-general of civil aviation, told Canadian media the training was a “possible option” but added it was too early to say if it would be mandatory.
The European Aviation Safety Agency, Canada and Brazil are among countries saying they will conduct their own evaluations of the MCAS fix.
What China, the first country to ground the 737 MAX, will do is also an unknown given the flare-up in trade frictions with the United States.
About five dozen representatives from 33 countries accepted the FAA’s invitation to attend the regulators’ conference in Texas.
Elwell said the closed-door meeting involved “frank questions and a frank discussion,” adding that his counterparts wanted “clarifications” on US procedures.
Regaining public trust will take time, according to opinion polls conducted by Southwest showing that many passengers are not yet ready to get back aboard a 737 MAX jet.
And pilots also have qualms.
“Before the Boeing MAX’s return to service, we need answers and transparency,” the European Cockpit Association said Thursday in a statement.
The organization, which represents 38,000 pilots from 36 countries, said it was “deeply disturbing” that the FAA and Boeing were considering a return to service while not disclosing “the many challenging questions prompted by the MAX design philosophy.”
Beyond Boeing’s reputation, the 737 MAX crisis comes at a major financial cost, given that the plane represented 80 percent of the company’s order backlog as of the end of last month.
The company, which has suspended deliveries, is only paid at the moment of delivery and will have to indemnify air carriers for losses.