The Saudi Stock Exchange (Tadawul) announced today (December 2) that it has updated its index methodology for the development and management of Tadawul equity indices.

These updates include revisions in free float shares calculation methodology, fast inclusion to Tadawul Main Market Index (Tasi), capped indices calculation and maintenance.

According to the updates, “Free Float Shares Calculation Methodology” has been revised with regards to Non-Free Float Shares owned by a Government Entity (ownership is 5 per cent and more), restricted shares, companies share buy-back, controlling ownerships, and shares held by members of the board of directors.

Tadawul is also applying a new rule for “Fast Entry”, whereby shares of significantly large IPOs are included in Tasi at the close of the 5th trading day.

Furthermore, Tadawul has introduced index capping for Tasi with a 15% threshold to reduce dominance of larger companies on the index performance so that the weights of all index constituents remain under a set capping threshold. Any constituent whose index weight reaches or exceeds the threshold will be capped in accordance with the set limit.

CEO Engineer Khalid Al Hussan said: "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 minimise securities’ dominance within our indices."

"Through our available information on indices, our market participants can easily obtain an accurate perspective on the performance of the main market and Nomu," stated Al Hussan.

"Today, Tadawul has 203 listed securities, with an average capitalisation of SR10 billion ($2.6 billion) and an overall market capitalisation of over SR1.9 trillion ($506 billion). A market with such large size requires balanced indices," he added.

The new updates will be effective by the end of this year, in alignment with the quarterly indices maintenance, except for the “Fast Entry” rule which will be effective immediately.
 
Saudi stock market is the 24th largest among the 67 members of the World Federation of Exchanges and is the dominant market in the Gulf region comprising 50.8 per cent of total regional market capitalisation and 77 per cent of value traded.-TradeArabia News Service