MSCI Inc and Saudi Stock Exchange (Tadawul) announced the launch of the MSCI Tadawul 30 Index (MT30), a tradable index.

The MSCI Tadawul 30 Index (MT30) initially comprises the 30 largest securities listed on the Saudi Arabian equity market, based on free float market capitalisation and screened for liquidity and international investability. The index will be rebalanced four times a year, and the number of securities may vary within a range of 25-35 securities to reflect changes in the underlying market. Individual securities are capped at a maximum 15 per cent weighting in the Index.

The index will provide investors with a useful benchmark of the largest liquid companies in Saudi Arabia and serve as the basis for development of an index futures contract listed on Tadawul and can be licensed for other index linked financial instruments, including mutual funds, derivatives and exchange-traded products.

Plans for the tradable index were announced by MSCI and Tadawul in September 2018. MSCI announced the classification of Saudi Arabia to an Emerging Market in its annual global market classification review in June 2018, citing the country’s capital markets reforms and the opening of the Saudi Arabia equity market to a broader pool of investors. Saudi Arabia will enter the MSCI Emerging Markets Index in two phases this year, with the first phase set to coincide with MSCI’s May 2019 Semi-Annual Index Review in June.

“We have seen increasing demand by institutional investors for tradable indexes that can serve as the basis for liquid instruments to access equity markets globally. The MSCI Tadawul 30 Index (MT30) has been designed with tradability, investability and capping criteria to be able to serve as the basis for index futures and other financial products including derivatives and exchange-traded products,” Robert Ansari, Head of the Middle East at MSCI, said.

“Today’s launch of the MSCI Tadawul 30 Index (MT30) is a significant step forward in facilitating the creation of a derivatives market for Saudi Arabia and advancement of the Vision 2030 Financial Sector Development Program. With additional derivatives launches in the pipeline, including the introduction of an associated exchange-traded index futures contract, we expect to make significant strides this year in further enhancing market efficiency and creating new opportunities for investors to diversify risk and broaden exposure to the Saudi market, which continues to be the largest and most liquid in the region,” Khalid Al Hussan, Chief Executive Officer of Tadawul, adds.