The Saudi stock exchange confirmed Monday that MSCI Inc. has taken a “regrettable position” of having to drop Tadawul-listed securities. The Tadawul press statement sought to allay local market fears that the dropping of Saudi stocks from MSCI might negatively influence the foreign investment strategies of fund managers for whom indices like MSCI's are benchmarks. Tadawul said that, unlike MSCI, nine local and international companies including Dow Jones Indexes (a leading international index provider) have signed the Tadawul Index Creation Agreement (TICA) “and fully agreed to comply with Tadawul's terms.” “Within weeks, Tadawul will sign the Index Creation Agreement with other local and international financial institutions,” the statement said, hoping that the licensing rights dispute with MSCI would blow over and that MSCI “continue to provide its indices linked to Saudi stocks through the Tadawul Index Creation Agreement.” MSCI had announced last week that Saudi Arabian stocks are included only in MSCI GCC Countries indices and MSCI Arabian Markets indices, and not in the MSCI Emerging Markets Index Series or any other MSCI Index Series. Tadawul said that MSCI's stand, taken at its “sole discretion” was a result of its “unwillingness to comply with the provisions of the Tadawul agreement on organizing the process of creating indices and linking financial products to Tadawul's information.” Indices are considered as tools to measure markets' performance. They can also be used as basis for structuring and evaluating financial products, such as mutual funds and ETFs. In effect, they help increase the diversity of financial instruments and investment opportunities in the Saudi market. “In this regard, Dow Jones Indices will soon launch in the international markets a set of financial indicators (Indices) based on Tadawul information,” the statement said. Tadawul reiterated its aim to develop the capital market and provide market information to all stakeholders, locally and internationally, including investors, portfolio managers and developers of financial instruments. Tadawul makes market information available either directly or through authorized local and international service providers. The structure and fees for providing those services have been approved by the Capital Market Authority (CMA). Recently, the exchange embarked on organizing the distribution of market information through proper agreements between Tadawul and index providers. “The provisions of these agreements have been developed in collaboration with specialized international consultants and are in line with common practices adopted by international exchanges,” the statement said.
