Saudi Arabia sukuk to join FTSE bond index

FTSE Russell said that Saudi Arabian Government bonds will be included in the FTSE Emerging Markets Government Bond Index (EMGBI) after its market accessibility level was upgraded from “0” to “1”.

The Index inclusion of Saudi Arabian sukuk is also scheduled to start in April.

As of the September 2021 profiles, 42 bonds with SR 306.1 billion (USD 81.6 billion) in par amount outstanding are projected to be included in the EMGBI and would comprise 2.75% of the index on a market value weighted basis.

To ensure comprehensive index coverage for global government bond markets, FTSE Russell will continue to track both sukuk and non-sukuk as part of its standalone FTSE Saudi Arabian Government Bond Index.

FTSE Russell is a leading global index provider creating and managing a wide range of indexes, data and analytic solutions to meet client needs across asset classes, style and strategies.

“Index inclusion of Saudi Arabian sukuk is scheduled to start in April 2022 and is projected to comprise 2.75% of the index on a market value weighted basis,” FTSE Russell said in a press release.

FTSE Russell also pointed out that it will continue to engage with the relevant Saudi Arabian market authorities regarding the levels of foreign holdings in Saudi Arabian government bonds and domestic market liquidity.

In March 2021, FTSE Russell announced that Saudi Arabia would be included on its Watch List for potential reclassification of its Market Accessibility Level from “0” to “1”, and consideration for inclusion in the FTSE Emerging Markets Government Bond Index (EMGBI).

Since launching a standalone government bond index tracking local currency Saudi Arabian government bonds in September 2020, FTSE Russell has engaged with local regulators in Saudi Arabia, as well as index users, to understand the market structure and investor experiences.

The FTSE Russell Saudi government bond index will cover government sukuk and bonds with a maturity of at least one year and a receivable value of not less than one billion Saudi riyals ($266.65 million).

Saudi Arabia was included in the FTSE Emerging Markets Government Bond Index (EMGBI) as a result of concrete developments and efforts made by the Capital Market Authority, as well as its efforts with relevant stakeholders in developing the market for sukuk and debt instruments.

The Saudi stock market took only 6 months since it was included in the index watch list on March 2021 until it actually included in the index on September 30, 2021.