Saudi exchange Tadawul weighs next steps in global and regional plans

Saudi exchange Tadawul weighs next steps in global and regional plans
This picture taken December 12, 2019 shows a view of the sign showing the logo of Saudi Arabia's Stock Exchange Market (Tadawul) bourse in the capital Riyadh. (AFP/File Photo)
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Updated 23 August 2020

Saudi exchange Tadawul weighs next steps in global and regional plans

Saudi exchange Tadawul weighs next steps in global and regional plans
  • Tadawul’s development and expansion is key to Vision 2030’s plans to grow Kingdom’s financial sector
  • Inclusion last year in the MSCI emerging market index gave a big boost to Tadawul’s global ambitions

DUBAI: Some people see a stock exchange merely as a financial marketplace where business is done on a daily and, hopefully, profitable basis.

Others regard them as centers of economic and financial power that can become a standard-bearer for a country’s urban development ambitions.

There is no doubt that the great stock markets of the world — in New York, London and Tokyo, for example — are regarded as national assets and key economic pillars.

For Saudi Arabia, Tadawul — the Riyadh exchange — is both. The development and expansion of Tadawul is one of the key pillars of the Vision 2030 plans to grow the financial sector of the economy.




A Saudi man monitors stock prices at Tadawul Saudi bourse in Riyadh on November 3, 2019. (AFP/File Photo)

Khalid Abdullah Al-Hussan, Tadawul’s CEO since 2015, has also made clear that he sees the exchange as a place for investors to make money, and to help facilitate the flow of capital that Saudi companies need to grow and thrive.

“In stock exchanges, in developed markets or in emerging markets, our business is to compete,” he told Arab News.

The big question for Tadawul now is: With whom is it competing, the other regional exchanges of the Middle East, or the great financial marketplaces of the world?

Over the past five years, Tadawul has moved decisively ahead in the competition with the other regional exchanges.

It always had big advantages in terms of sheer size and as the financial market of the Gulf’s biggest economy.




This picture taken December 12, 2019 shows a view of the exchange board at the Tadawul bourse in Riyadh displaying Aramco shares on the second day of their trading. (AFP/File Photo)

But what was a major handicap was that for a long time it was effectively closed to foreign investors.

Rules preventing foreign ownership have been gradually relaxed — first for big institutional investors and, more recently, for non-financial investors — to take “strategic” share stakes in Tadawul-listed companies.

Another big boost to global ambitions came from the inclusion last year in the MSCI emerging market index, which led to an instant inflow from overseas investors seeking access for their indexed funds.

Some 2,156 foreign investors are active on Tadawul, with a rise of 78 percent this year compared to last year, though they still comprise a relatively small proportion of daily activity.

It was the record-breaking initial public offering (IPO) of Saudi Aramco last December that propelled Tadawul into the premier league of global stock exchanges.

It jumped into the top 10 rankings of the biggest exchanges in the world, boosted by the huge market capitalization of the Kingdom’s oil giant.




This picture taken December 12, 2019 shows a view of the exchange board at the Tadawul bourse in Riyadh displaying Aramco shares on the second day of their trading. (AFP/File Photo)

Saudi Arabia has the third-biggest emerging-markets exchange in the world, behind only those of China and India.

In regional terms, it is virtually no contest. According to figures from the World Federation of Exchanges, it is by far the largest in the Gulf.

The value of the companies traded on Tadawul comprises more than 80 percent of the total for the Gulf Cooperation Council region.

Rivals in the UAE, Qatar and elsewhere — which do a perfectly good job serving their local economies — are barely in the same league as Tadawul in global terms.

THENUMBERS

Saudi Tadawul

* SR8.23 trillion Market capitalization of Tadawul (July 1, 2020).

* SR381 billion Volume traded on Tadawul (July 1, 2020).

* 2,156 Foreign investors active on Tadawul.

* 78% Increase in foreign investors over last year.

* 80% Tadawul companies’ share of total GCC valuation.

Al-Hussan said: “We’re competing with regional exchanges and international exchanges, and attracting more investors to invest in Tadawul.”

Regional financial experts are well aware of Tadawul’s edge. Tarek Fadlallah, CEO of Dubai-based Nomura Asset Management, told Arab News: “Tadawul is by far the dominant stock exchange in the region, whether judged by market capitalization or liquidity. Moreover, it’s arguably the most advanced in terms of its trading and settlement platforms.”

Al-Hussan has dramatically upgraded those systems to reach international best standards. Just in the past two years, a state-of-the-art independent clearing house, Muqassa, has been set up to handle settlement of share trades, as well as other improvements in the settlements and clearing system, such as custody and depository functions.

It has added other refinements that are taken for granted in the big global exchanges — such as share borrowing and short-selling — but which are rare in the Middle East.

Most recently, it announced plans to commence derivatives trading on Tadawul, another normal practice in Western markets but one that caused some comments in the region.




A file photo taken on December 12, 2019 shows a view of the exchange board at the Tadawul bourse in Riyadh. (AFP/File Photo)

Was Tadawul going headlong into the “trader” mentality of London and New York, with all the risks involved?

Wael Al-Hazzani, CEO of the Muqassa clearing-house operation, insists that risk is being managed carefully and prudently, especially in the planned derivatives business.

“The biggest risk any investor could face in any markets, even in cash markets, is the credit risk, and how the counterparty will fulfil their sides of any trades in the markets,” he told Arab News.

“We intend to complement our operations with sophisticated risk-management systems, making sure we’re controlling risk to the maximum extent we can.”

Al-Hussan reinforced this point, highlighting measures to ensure constant monitoring and supervision of margin requirements — the amount of cash an investor has to put up to trade the derivative — especially for small retail investors. Further fine-tuning of these mechanisms will be introduced later this year, he said.

The other big event on his calendar is the IPO of Tadawul itself. Floating your own shares on your own exchange is quite a common thing in global markets, and Tadawul has made no secret of the fact that it would like to follow suit.




A Saudi investor monitors the stock exchange at the Saudi Stock Exchange, or Tadawul, on December 14, 2016 in the capital Riyadh. (AFP/File Photo)

“We don’t have any internal debate on whether we should float the company. We confirm our position to take Tadawul public, but deciding to go public is about timing. Now, from a financial standpoint, Tadawul is solid and stable. The discussion today is about the right time to go for an IPO,” he said, indicating that a share flotation is on the cards sometime in the next two years.

Simultaneous with these moves to modernize and streamline Tadawul, Al-Hussan is thinking carefully about his next steps in the Gulf.

“If you look at it from a strategic point of view, I think our priority is to strengthen the region, if we can,” he said.

“We still believe this region has a strategic position between Europe and Asia, but it’s still behind on activating itself as a region,” he added.

“We believe, being the largest and most liquid exchange, we have a duty to activate as much as we can the region, alongside growing ourselves. This is where we stand.”

Activating can involve reaching alliances with other exchanges, like Tadawul has already done with the Abu Dhabi Securities Exchange to mutually enhance trading capabilities, for example in depository systems.

It can also mean dual listings, where a company has its primary market listing on, say, the Dubai Financial Market but also allows its shares to be traded on the more liquid markets of Tadawul in Riyadh.

“Based on the demand we’ve received from Gulf corporates, we’ve worked to define the model for cross-border listings and the infrastructure needed to accept companies from overseas,” said Al-Hussan.

“We’ve spoken to several that are interested to join Tadawul. The pandemic had some impact on these moves, but we still expect them to be coming to the market soon.”




A Saudi investor monitors the stock exchange at the Tadawul on December 14, 2016 in the capital Riyadh. (AFP/File Photo)

Might Tadawul’s regional play mean more than that, including the possibility that it could take over another exchange completely? Some financial experts in the region think that could be the logical outcome.

Fadlallah said: “It makes better sense to embrace a regional approach in which Tadawul can absorb its smaller peers.”

He added: “Acquiring the Bahraini stock exchange, for example, would appear logical and, subject to demonstrating successful integration and mutual benefits, perhaps adding other local exchanges over time could offer a single, deep and liquid destination for all international investors.”

It is by no means certain that the exchanges of the UAE, Kuwait and especially Qatar would want to give up their independence, of course.

But if there is ever to be a single Gulf stock market, serving as the key exchange in the crucial time zone between Asia and Europe, Tadawul would appear to be the only existing player capable of performing that role.

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Twitter: @frankanedubai 


Emirates to operate 70% of pre-pandemic capacity by year-end

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Updated 10 sec ago

Emirates to operate 70% of pre-pandemic capacity by year-end

Emirates to operate 70% of pre-pandemic capacity by year-end
  • The Dubai flag carrier may obtain further financial support from the Dubai government and could also issue bonds

RIYADH: Emirates Airline will operate 70 percent of its pre-pandemic power by the end of this year, Chairman Sheikh Ahmed bin Saeed Al-Maktoum revealed.
He said the company maintained strong financial solvency despite the devastating impact of the pandemic on the global aviation sector, Bloomberg reported.
The Dubai flag carrier may obtain further financial support from the Dubai government and could also issue bonds, he said.
“We are dealing with an emergency situation that changes on a weekly or even daily basis,” he said. “We are working on long and short trips. We currently have 151 Boeing 777 planes, and about 20 Airbus A380s in service, and we are awaiting the opening of markets and destinations to gradually return them,” he said.
Emirates Airline and flydubai were working to improve cooperation and develop further partnerships, he said.


Egypt to prioritize vaccination of tourism workers

Egypt to prioritize vaccination of tourism workers
Updated 13 min 54 sec ago

Egypt to prioritize vaccination of tourism workers

Egypt to prioritize vaccination of tourism workers
  • About 65 percent of tourists in Egypt head to those coastal destinations

DUBAI: Egypt is prioritizing the vaccination of tourism workers to support the sector’s recovery and is on track to announce full inoculation of two resort areas this month, its tourism minister said.
While Egypt’s tourism industry is still reeling from the COVID-19 pandemic, the sector has picked up in recent months, with more visitors heading to resorts along the Red Sea and Mediterranean coasts.
“We will prioritize workers in the tourism industry, which is an essential sector for Egypt’s economy,” Tourism and Antiquities Minister Khaled Al-Enani told AFP.
“In May, I will announce, along with the minister of health, the complete vaccination of Egyptian workers in hotels, resorts, businesses and restaurants in South Sinai and the Red Sea,” he said on the sidelines of a travel industry conference in Dubai.
About 65 percent of tourists in Egypt head to those coastal destinations, he said.
Enani said other tourist spots will follow, such as Luxor, Aswan and the capital Cairo, home of the Giza pyramids and major museums.
Egypt, which has a population of approximately 100 million, has administered some one million doses, according to authorities.
About two million people work in the tourism industry or organizations linked to it.
Along with its pyramids and pharaonic temples, Egypt is also known for its seaside resorts.
After experiencing “significant and continuous loss” since the coronavirus outbreak, the sector has picked up, said Enani.
He said Egypt welcomed 500,000 tourists in April, more than double the number in January and up from just 200,000 tourists a month in the second half of last year.
“The important thing is there is an upward curve,” Enani said.
“We hope the numbers will increase again in the near future with the opening of some countries and the easing of restrictions, including in Arab countries, Europe and Russia,” he said.
“The return of tourism in Egypt does not only depend on us, but remains linked to other countries.”
Cairo has announced several major new archaeological discoveries in recent months, hoping to revive a sector which was battered by a 2011 uprising, political unrest and jihadist attacks.
While the industry recorded a rebound of nearly $13 billion in revenues for 2018-2019, tourism was hit hard again by the  pandemic.
Official figures show a drop of more than 20 percent in revenues for mid-2019 to mid-2020.
Egypt reopened to foreign tourists in July last year after having closed its borders in March. Visitors only need to produce a negative PCR test.
Russia earlier this year resumed flights to Egypt’s Red Sea resorts after the lifting of a flight ban.
Moscow banned direct flights to Egypt after the 2015 bombing of a Russian airliner shortly after it took off from the Red Sea resort of Sharm el-Sheikh, killing all 224 people on board.
 


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Updated 52 min ago

Saudi sovereign fund PIF boosts US equities exposure to over $15 billion

Saudi sovereign fund PIF boosts US equities exposure to over $15 billion
  • Fund increased its US stock holdings to $15.4 billion in the first quarter

DUBAI : Saudi Arabia’s sovereign wealth fund has increased its US stock holdings to $15.4 billion in the first quarter from nearly $12.8 billion at the end of 2020, according to a US regulatory filing on Monday.
The Public Investment Fund (PIF) bought 2.9 million class A shares in SoftBank Group Corp-backed Coupang Inc, equivalent to $141 million, and dissolved its share stake in Suncor Energy, according to a Securities and Exchange Commission filing.
It more than doubled its position in Activision Blizzard to 33.4 million shares from 15 million shares at the end of the fourth quarter, which led it to a $3.1 billion exposure from $1.4 billion.
The fund increased its shares in Electronic Arts Inc. to 14.2 million, equivalent to $1.9 billion, from a $1.1 billion position at the end of the previous quarter.
PIF, which did not immediately respond to a comment request on the filing, is at the center of Saudi Arabia’s plans to transform the economy by creating new sectors and diversifying revenues away from oil.
The $400 billion fund is expected to inject at least $40 billion annually in the local economy until 2025, and increase its assets to $1 trillion by that date, which would make it one of the world’s biggest sovereign wealth funds.
“PIF would have wanted to take advantage of the bullish sentiment in equity markets in Q1 to make opportunistic investments and add to its portfolio,” said Rachna Uppal, director of research at Azure Strategy.
“In line with domestic efforts to achieve the objectives of Vision 2030, the Saudis also appear to be favoring investments into sectors such as technology, mobility, and especially future mobility, tourism and entertainment,” she said.
At the start of last year PIF piled up minority stakes in companies worldwide, taking advantage of market weakness caused by the coronavirus crisis.
Monday’s filing showed the value of its biggest US stock holding, Uber Technologies, rose to nearly $4 billion in the first quarter, from $3.7 billion as of Dec. 31, as the ride-hailing company’s shares gained value during the period.
PIF was an early investor in Uber, taking a $3.5 billion stake in 2016, three years before its listing in 2019.


Qatar Investment Authority to take $740m chunk of US renewables firm Avangrid

Qatar Investment Authority to take $740m chunk of US renewables firm Avangrid
Updated 57 min 45 sec ago

Qatar Investment Authority to take $740m chunk of US renewables firm Avangrid

Qatar Investment Authority to take $740m chunk of US renewables firm Avangrid
  • QIA will buy shares worth $740 million and Iberdorla, the largest shareholder in Avangrid

RIYADH: Renewable energy provider Avangrid said it would sell shares worth a total of $4 billion to both the Qatar Investment Authority (QIA) and Spanish Iberdrola Group for $ 51.40 a share.
QIA will buy shares worth $740 million and Iberdorla, the largest shareholder in Avangrid (based in Orange County, Connecticut, US), will purchase approximately $3.26 billion of stock, Asharq Business reported.
The deal is expected to close on Tuesday.
The Qatar Investment Authority last March also acquired 16 percent of the 53 million shares offered by Siemens Healthineers, through a private placement of $2.8 billion.
The fund is targeting deals in Asia, in an attempt to diversify its investment portfolio, which has a great focus and weight in America. Northern and Europe, Chairman Sheikh Mohammed bin Abdulrahman Al-Thani said in a previous interview with Bloomberg.

 


Egyptian neobank Telda raises $5m in Sequoia-led pre-seed round

Egyptian neobank Telda raises $5m in Sequoia-led pre-seed round
Updated 18 May 2021

Egyptian neobank Telda raises $5m in Sequoia-led pre-seed round

Egyptian neobank Telda raises $5m in Sequoia-led pre-seed round
  • It was the first investment for the American venture capital firm in the Middle East and North Africa

DUBAI: Telda, a Cairo-based digital banking application, has raised $5 million during its pre-seed funding round organized by US firm Sequoia Capital.
It was the first investment for the American venture capital firm in the Middle East and North Africa.
Global Founders capital and Class 5 Global also participated in the round.
The app recently announced it has received license from Egypt’s central bank to issue cards and on-board customers to its platform.
It has received 30,000 sign ups since it started its operations, it said.
The funding comes as digital-only banks rise in popularity across the region, where 60 percent of the population is estimated to be under the age of 25.
“Egypt boasts of a large, young, talented and tech savvy population with a strong appetite to innovate,” Sequoia partner George Robson said.
Egypt is among the top 10 countries most reliant on cash and with the highest rate of unbanked people, according to Merchant Machine.
“Today’s funding milestone promotes the digital transformation of the Egyptian economy and allows Telda to provide everyone with access to important financial services so they can fully participate in the economy,” Telda chief technology officer Youssef Sholqamy said.
Sholqamy, who was a former senior engineer in Uber’s infrastructure team, co-founded the startup with Ahmed Sabbah, who also founded the Egyptian bus-hailing service Swvl.