Saudi Arabia is one of the world’s energy superpowers. And it has plans to diversify its domestic economy and develop other sectors. For those interested in investing in Saudi Arabia, we analyze its most important stock market indices.
Saudi Arabia is famous for its massive oil reserves. Along with the United States and Russia, it is one of the world’s energy superpowers. And while oil exports still represent the most important economic activity and source of revenue for the country, the Saudi government has much more ambitious plans for the future.
With a population of almost 40 million people and growing, Saudi Arabia can be considered a regional power in the Middle East.
The country has a developed economy, but still heavily dependent on oil exports. It is for this reason that the government has plans to modernize its infrastructure and make its economy more competitive on the global stage.
In this sense, Saudi Arabia has some positive things going for it. First of all, taxation is excellent in the country. Personal income tax does not exist. And corporate profits are taxed relatively lightly.
In addition to that, its currency, the Saudi riyal, whose international code is SAR, has been pegged to the US dollar for a long time. Specifically, since 2003, the exchange rate has been fixed at 3.75 riyals per dollar. As a result, it is a country with a lot of monetary stability.
Finally, at the political level, Saudi Arabia is also very stable, something international investors value positively.
In 2019, the Saudi Stock Exchange was often in the news because a small percentage of Saudi Aramco, the country’s state-owned oil company, went public. Saudi Aramco is one of the world’s largest companies by market capitalization.
For those interested in investing in Saudi Arabia passively through an ETF, we analyze its most important stock market indexes in the next few sections.
The TASI is the main stock market index in Saudi Arabia. TASI is short for Tadawul All-Share Index. Tadawul is the name given to the Saudi Stock Exchange in Riyadh. This index is calculated by the Saudi Stock Exchange itself.
The TASI is made up of all companies listed on the Riyadh Stock Exchange, regardless of their size. Hence, it is representative of what happens to the broad corporate sector in the country. However, it should be noted that larger companies receive a higher weighting.
If you want to learn more about the TASI, you can visit the official website of the Saudi Stock Exchange.
MSCI Tadawul 30
In 2014, the Saudi Stock Exchange and the company MSCI decided to start a partnership with the goal of creating a new index, the MSCI Tadawul 30.
The purpose of this index is to offer an alternative for issuers of passive funds to create investment vehicles through which investors can put their capital in the country’s stock market.
The MSCI Tadawul 30 is made up of the 30 largest companies in the country, although the index’s methodology allows the number of stocks to fluctuate between 25 and 35.
Within the index, companies are weighted based on their market capitalization adjusted for free float. But it should be noted that no single company can represent more than 15% of the index value at the time the index is rebalanced.
The MSCI Tadawul 30 is strongly dominated by the banking sector. Two of the most important stocks are Al Rhaji Bank and Saudi National Bank.
More details about the MSCI Tadawul 30 can be found on the Saudi Stock Exchange website.
MSCI Saudi Arabia
Finally, the MSCI Saudi Arabia is a stock market index calculated by MSCI. The number of stocks within this index is not constant, but fluctuates over time.
Thus, the MSCI Saudi Arabia is composed of all Saudi companies that are part of the global MSCI Emerging Markets index.
This index weights stocks based on their market capitalization adjusted for free float, without imposing any type of cap. And updates are carried out regularly throughout the year, with the aim of keeping it representative of emerging stock markets.
Some of the largest companies in the index are Al Rhaji Bank and Saudi Aramco. It is worth mentioning that this index is highly correlated with the MSCI Tawadul 30, analyzed in the previous section.
Additional details about the MSCI Saudi Arabia can be found on the MSCI website.
I hope you found this information about Saudi Arabian stock market indices useful. To learn about stock market indices in other promising countries, visit this section:
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