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These indices, based on company size and initial public offering (IPO) performance, are designed to provide investment benchmarks for investors and enable financial institutions to introduce new products. The large, medium, and small-cap indices, collectively called Size Indices, reflect the market’s composition. Large companies account for 70% of the free float market capitalization, medium-sized companies contribute 20%, and small companies make up the remaining 10%.
The newly introduced Tadawul IPO Index will track the performance of companies listed on the main market in the past five years. The goal is to give investors a benchmark to evaluate their IPOs and offer a unique opportunity to invest in new and rapidly growing companies.
Mohammed Al Rumaih, CEO of the Saudi Exchange, said that these indices would serve as valuable benchmarks for investment products and would allow both local and foreign investors to access and benefit from Saudi Arabia’s dynamic and growing capital market.
To ensure a balanced representation of the entire market, the maximum weight of any index constituent will be limited to 15%, similar to the existing Tadawul All Share Index (TASI).
This initiative comes as Saudi Arabia, the Arab world’s biggest economy, has been implementing measures to attract international investors. Tadawul became the third publicly traded regional stock exchange after Dubai Financial Market and Boursa Kuwait when it was listed in December 2021.
The kingdom has seen a surge in IPOs amid strong investor demand as economies rebound from the coronavirus pandemic-induced slowdown. The volume of IPOs on bourses in the Mena region increased by 44 percent annually in the second quarter of this year, driven by strong economic growth in Saudi Arabia and the UAE.
Notably, Jamjoom Pharmaceuticals and First Milling Company were among the largest IPO deals in Saudi Arabia during the second quarter, raising $336 million and $266.4 million respectively. Both companies offered 30 percent of their share capital to the public in deals that were oversubscribed.
Furthermore, last month, Lumi, an auto rental subsidiary of Seera Group Holding, announced plans to list its 30 percent stake in the Tadawul. In December 2021, Saudi Aramco (TADAWUL:2222) Base Oil Company, or Luberef, began trading on the Saudi Exchange after raising $1.32 billion in its IPO.
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