Tadawul to allow funds to invest in Islamic bonds

23 March 2010

Regulator says exchange traded funds will be able to invest in sukuk and commodities

Saudi Arabia will allow exchange-traded funds (ETFs) to invest in Islamic bonds (sukuks) and commodity instruments in addition to local equities, according to a statement posted on the Saudi stock exchange (Tadawul) website.

An ETF is an investment fund traded on stock exchanges, which invests in several underlying assets, such as equities or bonds, giving investors exposure to several assets in a single product.

“ETFs are not limited to stocks alone but may also include sukuk or commodities such as gold and silver, but in the primary phase of this project, only funds with Saudi stocks will be launched,” the Capital Market Authority (CMA) said in the statement.  

On 17 March, Falcon Financial Services, a Shariah-compliant investment bank headquartered in Riyadh, won approval to list an ETF, although no listing date has been provided (MEED 17:3:10).

Abdul Rahman al-Tuwaijri, chairman of the CMA, said earlier this month the bourse was trying to become more accessible, without allowing speculative foreign money to flow in, suggesting that direct foreign investments were not being considered at present.

In August 2008, swap agreements were introduced on the Tadawul, which allow non-resident foreign investors to trade in local stocks through Saudi intermediaries.

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