Tadawul to change settlement cycle in a month

The Saudi Arabian stock exchange will align its settlement cycle with international norms on April 23.

The exchange, whose Arabic name is the Tadawul, is adopting a two-day settlement cycle (T+2) as part of a programme to open up to foreign capital. The Tadawul currently operates a T+0 system in which trade and settlement happen on the same day.

“Amending the settlement cycle of listed securities will increase the level of asset safety for investors by providing enough time to verify trades, and will unify the settlement duration for all types of listed securities,” said the exchange in a statement.

The exchange said the move was part of the kingdom’s Vision 2030 plan, an ambitious programme to diversify and modernise the economy. Attracting greater foreign participation in the country’s capital markets is seen as integral to the programme.

The Tadawul began allowing qualified foreign institutional investors to buy shares on the exchange on June 15, 2015, however hurdles, such as the T+0 system, have hampered inflows.

With the largest market value of any exchange in the MENA region, the Tadawul is a candidate for inclusion in the MSCI Emerging Markets index. Early this year, MSCI put out a statement praising the Saudi authorities for their efforts to open the market to foreign investors.

However, a review of Saudi Arabia’s suitability for inclusion will not begin until June at the earliest, and MSCI declines to predict when the inclusion might occur.

A survey of fund managers recently revealed that only 16% expected Saudi Arabia to join the MSCI Emerging Markets index next year. More than a quarter said it would not join until after 2020.

©2017 funds global mena

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