Saudi Arabia Sukuk has been added to the FTSE Emerging Markets Government Bond Index (EMGBI) by FTSE Russell, a leading global index provider of benchmarks, analytics, and data solutions.
On a market value-weighted basis, 42 government Sukuk are expected to make up 2.75 percent of the index, effective from April 2022.
The inclusion came as a result of the Capital Market Authority’s (CMA) tangible developments and efforts, as well as its collaboration with relevant authorities in developing the Sukuk and Debt Instruments market. It took only six months since joining the list of monitoring of the index in March 2021 until its actual accession to the index on September 30.
The CMA seeks to achieve the goals of the Kingdom’s Vision 2030 through the Financial Sector Development Program (FSDP) and its efforts contributed to raising foreign investors’ ownership of Sukuk and debt instruments to 223 percent during the first half of 2020 until the second half of 2021.
Adding Saudi Arabia to the FTSE EMGBI is a significant milestone in the growth of the broader Saudi capital market, as it is the first time Saudi Riyal-denominated Fixed Income Instruments have been included in a global index.
In 2018, foreign investors were allowed to invest directly in debt instruments in the local market, and issuers wishing to offer debt instruments were exempted from paying the financial compensation collected to the Authority when applying for registration, studying the application, and registering the debt instruments.
“The Saudi capital market continues to grow at pace and the inclusion of Saudi Arabia in the FTSE Emerging Markets Government Bond Index highlights the importance of the enhancements made by the Saudi Exchange, which is a landmark achievement that will pave the way for its recognition globally.”
In 2021, the Authority approved the instructions for international securities depository centers, which provided an additional channel for foreign investors to invest in the local Sukuk and debt instruments market.
In August 2021, more than $880 million in Saudi government debt was traded, and the exchange now lists over 70 government debt instruments, while the total size of issuance for Sukuk or bonds is more than $120 billion.
The Saudi stock market joined the MSCI Emerging Markets Index (MSCI), the FTSE Russell Index, and the S&P Index at the beginning of 2020, completing its integration into the most prominent emerging market indices.