Saudi Arabia's Tadawul exchange forms a Shariah advisory committee

The bourse will collaborate with IdealRating, an Islamic finance solutions firm, to provide screening services of listed companies

The move by the Saudi Stock Exchange (Tadawul) is aimed at enabling transparency in decision making. Reuters

Saudi Exchange said it will form a Shariah advisory committee as part of efforts to maintain the highest standards of governance over investment tools that it will provide.

The committee comprises representatives from the largest financial institutions in the kingdom.

To ensure transparency in decision making, the Saudi Exchange will oversee the Shariah advisory committee without actively taking part in the company screening and selection process, the bourse said in a statement on Thursday.

"The committee members will work towards a unified Shariah-compliant rulebook that will be approved by the committee members’ respective Shariah boards," it said.

"Moreover, the committee shall undertake the responsibility of overseeing and approving the list of Shariah-compliant listed companies on a periodic basis. In addition, the Saudi Exchange would consult the committee from time to time on some of the Saudi Exchange products and services."

The committee includes members from major financial institutions including Jadwa Investment, Alinma Investment, SNB Capital, Al Bilad Capital, Al Rajhi Capital, Al Jazira Capital, Riyad Capital and Al Istithmar Capital.

The Saudi Exchange will also collaborate with IdealRatings, a leading global Islamic finance solutions firm, to provide Shariah screening services of listed companies within the Saudi capital market, the statement said.

The list will be reviewed and approved by the Shariah advisory committee.

"This collaboration will aid the Saudi Exchange to expand its offering to cover new Shariah-compliant investment tools and products," the bourse said.

Tadawul Exchange's market capitalisation grew 24.21 per cent annually to reach 11.96 trillion riyals ($3.19tn) in the first quarter of 2022, as the Arab world’s biggest stock market continues to experience increased momentum.

The Tadawul All Share Index closed at 13,090.40 points at the end of March 31, up 32 per cent over the same period the previous year, the exchange said in a statement on its website this month. The highest close level for the index during the period was 13,101.36 points on March 29.

There has been a growing interest for initial public offering issuances in Saudi Arabia. The kingdom topped the GCC last year in terms of the number of listings, accounting for 15 out of 20 IPOs in the region, with the listings taking place both on Tadawul’s main market and its Nomu parallel market, Kamco Invest said in a report.

The country also accounted for about 62 per cent of the value of the region’s offerings, at about $4.65bn.