Mohammed bin Sulaiman Al-Rumaih

The Saudi Exchange continues to take significant steps to incentivize international participation in the exchange by investing in world-class market infrastructure and introducing diverse opportunities.

How has the launch of the Derivatives Market in 2020 made the market more attractive to overseas share buyers, and how have your efforts to introduce products such as options into the Derivatives Market progressed?

The introduction of derivatives products and trading opportunities to the Saudi capital market in August 2020 attracted foreign investors looking for new opportunities on the Saudi Exchange. The first derivatives product we launched was the MT30 Index Futures, an index futures contract based on the broader MSCI Tadawul 30 Index (MT30). The product is designed to reflect the performance of the 30 largest and most liquid stocks listed on the exchange. Since then, we have continued to grow our derivatives market in ways that appeal to investors and increase the attractiveness of the Saudi capital markets. For example, in July 2022, the Saudi Exchange launched Single Stock Futures. The stocks underlying this derivatives product are from the 10 most liquid companies on the exchange. Importantly, we believe that SSFs demonstrate the sophistication of the Saudi Exchange’s offering and enable local and international investors to hedge and manage portfolio risk more effectively. Trading volume for Single Stock Futures has increased by almost four times since launch, and trading volume for Index Futures has increased by 11% since launch. We are looking to enhance our derivatives offering further through the introduction of new products, such as single stock options.

As the world moves toward a greener future, how is Saudi Exchange enforcing ESG practices? How can investors invest while still aligning with environmental sustainability?

Incorporating ESG practices can help a company succeed in today’s business landscape with many investors considering a strong ESG focus as a signal of business resilience and competitive strength. We are playing an active role in directly advising listed companies on incorporating ESG practices into their businesses. In November 2021, we launched ESG disclosure guidelines to equip listed companies with the information that they need to navigate the dynamic ESG landscape and provided them with various reporting options. In February 2022, the Exchange launched an awareness-building webinar series to educate companies about the benefits that incorporating ESG practices within their businesses can bring. Recently, in February 2023, the Saudi Exchange signed an agreement with the Capital Market Authority and Ministry of Economy & Planning to develop a national ESG taxonomy in Saudi Arabia. This initiative will help drive sustainable development and advance ESG industry standards in the Kingdom. Sustainability continues to be an important issue at the Saudi government level as well. Saudi Arabia aims to achieve net zero emissions by 2060 and generate 50% of the country’s energy from renewables by 2030. The launch of the Saudi Green Initiative, Middle East Green Initiative, and the Regional Voluntary Carbon Market further demonstrate the importance of ESG across the Middle East region. Incorporating ESG principles can contribute to the long-term growth of a company and deliver additional business opportunities. We are eager to help listed companies and investors alike capitalize on this exciting opportunity and have seen positive trends in this regard. By the end of 2022, 21% of Saudi exchange issuers disclosed their ESG efforts, and we are seeing more and more issuers commit to net zero.

How has Saudi Arabia’s inclusion in the MSCI Emerging Market Index incentivized foreign investment into the Saudi Exchange Market?

Joining the MSCI Emerging Market Index in 2019 required Saudi Arabia to meet strict inclusion criteria. Our inclusion in the index indicated the sophistication of our infrastructure and strong governance of the Saudi Exchange and listed companies. The inclusion gave investors the confidence that they need to enter our capital market. We have seen tremendous growth in the number of QFIs in our market in recent years. This, in many ways, is a result of the changes we have implemented as part of our effort to secure inclusion in the MSCI Emerging Market Index and align our market operations with peers around the world.