Tadawul updates rules on index methodology

Saudi stock exchange, TadawulThe Saudi stock exchange, or Tadawul, has announced a series of rule changes designed to make its indices perform in a more balanced way. The changes to its index methodology will include a 15% threshold to reduce the dominance of larger companies on index performance and to ensure that the weights of all index constituents remain under a set capping threshold. “The update to Tadawul’s indices methodology reflects our continuous efforts to further develop the Saudi capital market and ensure more balanced indices, which will accurately represent the movement of the market, enhance disclosures and transparency and minimize securities’ dominance within Tadawul Indices,” said Khalid Al Hussan, chief executive of Tadawul. The exchange currently has 203 listed securities and an overall market capitalisation of more than $500 billion. “A market with such large size requires balanced indices,” said Al Hussan. The exchange is also looking to apply a new “fast entry” rule in which shares of large IPOs are included in the Tadawul Share Index at the close of their fifth trading day. The changes come ahead of the imminent Saudi Aramco IPO which is expected to trade on Tadawul some days later. While the majority of the new rules will come into force at the end of 2019, the fast entry rule will be effective immediately. ©2019 funds global mena

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