Saudi Tadawul expects $3bn additional inflows from FTSE inclusion: chairwoman

The Middle East’s largest bourse is expected to launch the first exchange-traded derivative product in the fourth quarter of 2019. (Reuters)
Updated 11 September 2019

Saudi Tadawul expects $3bn additional inflows from FTSE inclusion: chairwoman

RIYADH: The Saudi Stock Exchange (Tadawul) expects additional passive funds’ inflows worth $3 billion from the remaining phases of inclusion in the FTSE Russell emerging market index starting in September, its chairwoman said.
The Middle East’s largest bourse is also expected to launch the first exchange-traded derivative product — an index futures contract based on the MSCI Tadawul 30 Index — in the fourth quarter of 2019, Sarah Al-Suhaimi said.
The kingdom opened its stock market to foreign investors in 2015. It has since introduced a raft of reforms to make it attractive to foreign investors and issuers and to expand its institutional investor base, as part of an ambitious plan to diversify the economy away from hydrocarbons.
The Saudi inclusion in emerging markets indices has generated foreign inflows worth billions of dollars since the start of the year, and is expected to facilitate Riyadh’s plans to sell about 5 percent of its oil giant Aramco in an IPO and reinvest the proceeds in new industries.
Inflows of foreign funds will help absorb the huge IPO, especially with an increasing likelihood of a domestic listing on the Riyadh bourse followed by a later international offering.
In August, the Saudi exchange completed the second and final phase of joining the MSCI Emerging Markets Index, raising its weight on the closely-monitored index to 2.8 percent.
“Since the beginning of this year, foreign investors have traded more than $65 billion and have been net buyers of more than $20 billion of Tadawul-listed shares through August 29,” Suhaimi said in an emailed response to Reuters inquiries.
Suhaimi said the number of qualified foreign investors (QFIs) has “grown exponentially” by 200 percent year-to-date, reaching more than 1,300 and is set to grow further by the end of 2019.
“The additional passive inflows from the remaining tranches of FTSE inclusion is expected to be around $3 billion,” she said.
“Tadawul is in the final implementation phase of establishing a Derivatives Market and is actively working on market readiness from a technology, trading and business perspective. We expect to launch the first exchange-traded derivative product – an index futures contract based on the MSCI Tadawul 30 Index — in the fourth quarter of 2019.”
She said the Saudi market will continue to be of interest to international investors despite heightened volatility in global markets due to trade conflicts and political concerns.
“Foreign investors ownership percentage is now at 8.3 percent, that is 76 percent growth year-to-date. Additionally, Saudi market performance year-to-date has been positive at 4.8 percent growth while FTSE EM only grew by 1.76 percent and MSCI EM declined by -0.15 percent for the same period,” she said.


Blame game as wheels come off India’s auto sector

Updated 16 September 2019

Blame game as wheels come off India’s auto sector

NEW DELHI: When India’s Finance Minister Nirmala Sitharaman claimed that a preference by millennials for ride-hailing apps was contributing to a painful slump in car sales, it sparked an online backlash from furious youngsters.

They started a campaign using ironic hashtags such as #BoycottMillennials and #SayItLikeNirmalaTai last week to push back against older generations blaming them for today’s problems in society.

While data shows firms such as Uber and Ola are popular with younger consumers more comfortable with shared mobility and digital trends, analysts say the auto industry’s problems run deeper than that — and it is facing more serious bumps in the road.

With a population of 1.3 billion people, India is the world’s fourth-largest car market and one where owning a vehicle is as much a status symbol as a means of transport.

But the country’s once-booming auto sector — seen as an important barometer of overall economic health — is in the slow lane, with sales slumping for the 10th-straight month in August.

“The minimum (priced) car that you can get nowadays starts from six to seven lakhs ($8,500 — $9,800),” university student Somya Saluja told AFP.

“So it’s much easier to pool-in rather than to buy a new car.”

Even India’s richest banker, Uday Kotak, recently said that his son was more comfortable using ride-sharing apps than owning a car.

Uber and Ola reportedly facilitate some 3.65 million daily rides.

Still, Avanteum Advisers managing partner VG Ramakrishnan told AFP the key reason for the drop in car purchases was economic.

“I think the slowdown is primarily because consumer confidence is low and income growth has really been impacted in the last couple of years,” he told AFP.

India’s economic growth slowed for the fifth-straight quarter in April-June to reach its weakest pace in five years.

Banks are also more reluctant to lend owing to a liquidity crunch caused by the near-collapse a year ago of IL&FS, one of India’s biggest shadow banks — finance houses responsible for significant consumer lending.

There are also extra production costs caused by new rules requiring cars to be compliant with emissions and safety standards, while a 28 percent goods and services tax (GST) introduced in 2017 has dampened demand, analysts said.

“Cars are increasingly becoming unaffordable now because of so many taxes,” Karvy Stock Broking auto analyst Mahesh Bendre told AFP.

“To put things in perspective, if you buy a car in India, at least 40-45 percent of costs go to the government in terms of taxes and registration charges and so on.”

A year ago, India displaced Germany to become the world’s fourth biggest car market, having clocked up annual sales growth above seven percent for several years.

But the promising growth ride is screeching to a halt, with passenger car sales tumbling this year, including a 41 percent drop last month — the worst since records began more than 20 years ago.

Aside from passenger cars, sales of commercial vehicles, motorcycles and scooters have also been hammered.

With the industry — a major employer in India — contributing more than seven percent to total GDP and almost half of manufacturing GDP, the potential fallout from an extended slowdown is sending shockwaves through the economy.

Manufacturers are reducing production and cutting jobs, which is also affecting related industries such as auto component manufacturing and at dealerships, totaling about seven percent of India’s total workforce, Bendre said.