Saudi bourse says derivative product to boost investment profile ahead of IPO

RIYADH/DUBAI (Reuters) - Saudi Arabia’s bourse is committed to listing on the stock exchange and the launch of its first exchange-traded derivatives product will enhance its profile with foreign investors ahead of its flotation, its chief executive said.

FILE PHOTO: Khalid al-Hussan, Chief Executive Officer of the Saudi Stock Exchange (Tadawul), speaks during a news conference after the inclusion of MSCI EM to the Saudi Stock Market in Riyadh, Saudi Arabia June 21, 2018. REUTERS/Faisal Al Nasser/File Photo

Tadawul, which hired HSBC HSBA.L in 2016 to manage its planned initial public offering (IPO), initially targeted for 2018, had put its plans on hold due to oil giant Saudi Aramco's 2222.SE record $29.4 billion IPO at the end of last year.

CEO Khalid Al-Hussan said the launch on Aug. 30 of the exchange-traded derivatives product, would also help deepen liquidity on the local equity market and enable it to compete regionally and globally.

“It is indeed complementing our IPO story, it is complimenting our readiness to go public, because we’re still committed to take Tadawul public,” Al-Hussan told Reuters in an interview. “It fits very well in our equity story,” he added.

The Dubai Financial Market is the only publicly listed stock market in the region.

Al-Hussan said the stock exchange plans to complete the market infrastructure for derivatives by 2022, an essential milestone that would bring the bourse closer to an IPO. “We hope that (the IPO) can be within that timeframe,” he added.

With a market capitalisation of $2.5 trillion, Tadawul is the world’s 9th biggest stock market, ranked after the London Stock Exchange and ahead of Canada’s Toronto Stock Exchange, according to World Federation of Exchanges data.

“We are in good shape as being the largest in the region, our focus now is to activate this region’s presence on the global map,” Al-Hussan said.

“Exchanges in Europe, the U.S. and Asia are very active across the board and the region we are in is a little bit behind in that perspective so as Tadawul we have a great role to play here.”

The bourse has benefited from Aramco’s listing. It has welcomed a slew of companies this year including healthcare firm Suleiman Al Habib and real estate financing firm Amlak International.

It is also exploring mergers and acquisition (M&A) opportunities and is in talks with regional counterparts to expand clearing and depository business to those markets, Al-Hussan said.

“There is a great opportunity in clearing and depository especially in this region to integrate further,” he said, adding that Tadawul is in advanced talks with an exchange in the Gulf region and in early talks with another on how its clearing centre “Muqassa” can play a role in this.

Reporting by Marwa Rashad in Riyadh and Hadeel Al Sayegh in Dubai; editing by Saeed Azhar and Emelia Sithole-Matarise