Tadawul becomes one of world's top 10 stock markets

Saudi exchange will introduce derivatives trading this year, starting with an index future followed by single stocks, options and possibly commodities contracts

Sabic reported its a loss in the second quarter on the back of lower selling prices for its products and impairment provisions. Bloomberg

The initial public offering of state-owned oil company Saudi Aramco helped to propel the kingdom's stock exchange, Tadawul, to become one of the top 10 markets globally in 2019, with a valuation of $2.4 trillion (Dh8.8tn), according to the exchange's annual report.

The record-breaking IPO, which started at $25.6bn but later increased in size to $29.4bn when a 'greenshoe' option was exercised, was one of a series of events that helped to grow the size of the kingdom's exchange. Five other listings raised a further 17.5bn Saudi riyals (Dh17.13bn, $4.67bn), bringing the total number of listed companies to 199.

Tadawul represented 76 per cent of total market capitalisation of the Middle East and North Africa region by the year end, the report said.

The 12-month period was described as "a year in which we made a quantum leap" by Tadawul's chairwoman, Sarah Al-Suhaimi.

"The Aramco listing at the close of the year brought us within the ranks of the leading exchanges globally, with a near five-fold growth in market capitalisation. Tadawul has now acquired more international visibility and is seeking to expand its activities regionally and worldwide," she said.

Tadawul's own financial performance also improved, with net profit increasing 3.4 per cent to 153.3m riyals, despite a 3.2 per cent decline in operating revenue to 564.7m riyals.

The Tadawul All-Share Index experienced significant swings in 2019, climbing 20.1 per cent in May 2019 in the run-up to the exchange's upgrade to emerging market status by index providers MSCI and S&P. However, geopolitical tensions later in the year wiped out almost all of these gains, until the Aramco IPO "helped push investor sentiments towards the close of the year", meaning it finished 7.2 per cent higher, according to Kamco Research.

Turbulence in emerging markets globally this year has led to another sell-off, with the index down 13.9 per cent so far this year, according to EFG Hermes. However, momentum in terms of new companies coming to market continues. Health care firm Dr Sulaiman Al Habib Medical Services Company achieved a $700.9m listing in the first quarter of 2019 and home finance company Amlak International said on Tuesday that its IPO is five times' oversubscribed. It is planning to raise 434.88m riyals, listing 27.18 million shares at 16 riyals per share.

Tadawul also said after markets closed on Tuesday it had approved retailer Bindawood Holding's proposal to list up to 20 per cent of its shares on the exchange.

This year, Tadawul is creating a clearing subsidiary, Muqassa, to reduce counterparty risk and will introduce derivatives trading, chief executive Khalid Al Hussan said in the report.

"The MT30 Index Futures will be launched first, to be followed by stock futures and options. Commodities may follow at a later stage," he said.