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Tadawul announces updates on index methodology

Tadawul announces updates on index methodology
Index capping for TASI will be applied with a threshold of 15%

Riyadh – Mubasher: The Saudi Stock Exchange (Tadawul) announced on Monday that it has updated its indices methodology for the development and management of Tadawul equity indices.

The updates include revisions in free float shares calculation methodology, fast inclusion to the main market index, Tadawul All Shares Index (TASI), capped indices calculation and maintenance.

Firstly, free float shares calculation methodology has been revised with regards to non-free float shares owned by a Government entity where ownership is 5% and more, restricted shares, companies share buy-back, controlling ownerships, and shares held by members of the board of directors.

Moreover, Tadawul will start applying a new rule for “Fast Entry” whereby shares of significantly large initial public offering (IPOs) are included in TASI at the close of the fifth trading day.

Finally, the Saudi exchange will be applying index capping for TASI with a threshold of 15%.

Except for the Fast Entry rule that is effective immediately, changes related to free-float shares and index capping for TASI will be effective by the end the fourth quarter (Q4) of 2019, in alignment with the quarterly indices maintenance, according to an official statement.

Commenting on the new changes, Tadawul CEO Khalid Abdullah Al Hussan said that the aim is to develop the Saudi bourse and ensure the highest level of balance in market indices.

Al Hussan further noted that the methodology updates will more accurately reflect the market’s activities, enhancing financial disclosures and transparency, and market balance.

Investors will be able to better track the performance of both the main (Tadawul) and parallel (Nomu) markets, the CEO indicated.

The number of Tadawul-listed companies has reached 203 with an average market value of SAR 10 billion ($2.6 billion), and a total market value of SAR 1.9 trillion ($506 billion). A market with this size requires fair and balanced indices, Al Hussan added.