Saudi Arabia's Tadawul to launch first Sharia-compliant index

The bourse aims to meet growing demand from local and international investors for Islamic investment tools

Saudi Arabia's stock exchange in Riyadh has announced the launch of its first Sharia-compliant index. AFP

Saudi Arabia's Tadawul stock exchange has launched its first Sharia-compliant index in response to growing demand and interest from local and international investors for Islamic investment tools.

The TASI Islamic Index will track the performance of Sharia-compliant companies listed on the Saudi stock exchange under the supervision of an independent Sharia Advisory Committee, Tadawul said in a statement on Sunday.

It will guide investors when looking into Sharia-compliant investments, while also allowing asset managers to benchmark the performance of their portfolios in the sector, Tadawul said.

“The launch of the TASI Islamic Index complements the exchange’s ongoing product and indices development efforts to provide best-in-class services and diversified offerings to investors,” Mohammed Al Rumaih, chief executive of the Saudi Exchange, said.

“The index will facilitate the launch of new financial products in the market to satisfy the increasing demand for Sharia-compliant investment tools.

“The introduction of such tools shall ultimately boost the Islamic investment sector in the kingdom.”

The move comes after the Tadawul launched single stock futures (SSFs) contracts on July 4 as it seeks to boost market liquidity. The bourse said 10 underlying stocks were selected for SSFs contracts based on criteria to ensure market interest and liquidity.

The kingdom has introduced a series of measures to attract international investors as part of efforts to draw foreign investment, diversify the economy and reduce its reliance on oil.

Tadawul, which is among the top 10 global stock markets, became the third publicly-traded regional stock exchange after the Dubai Financial Market and Boursa Kuwait when it listed on December 8, 2021.

The Saudi exchange will collaborate with the Sharia Advisory Committee, which consists of representatives from leading financial institutions, to maintain governance standards while ensuring the new index constituents abide by the unified Sharia-compliant principles based on clear and transparent criteria, it said.

They will also oversee and approve the list of Sharia-compliant listed companies on a regular basis.

The launch of the index is part of the bourse's continuing efforts to diversify its offerings and investment opportunities, with the goal of increasing the Saudi capital market’s attractiveness among local and international investors, it said.