You may be aware of the Tadawul All Share Index if you have invested in the Saudi region via an authorized fund based overseas, or if you live and invest in the Middle East. In this guide we look at methods and investment products that track and provide exposure to the TASI index, the reference for the Saudi stock exchange.
Saudi Arabia holds exciting potential for investors. A G20 economy with a young, highly educated population of over 34 million inhabitants. It also boasts a strategic location at the heart of major trade routes crossing three continents and bountiful natural resources.
Tadawul All Share Index (TASI) index - Key Takeaways
- The Tadawul All Share Index (TASI) index is used as an important benchmark in measuring the returns of all stocks traded on the Saudi Stock Exchange.
- Index investing has become increasingly popular over the years, with this passive strategy outperforming more active investment over time, especially net of fees and taxes.
- Exposure to the Tadawul All Share Index (TASI) index can only be accomplished indirectly, either through self-indexing, index derivatives, or index funds & ETFs like the iShares MSCI Saudi Arabia ETF (KSA).
What is the Tadawul All Share Index (TASI)?
The Tadawul All Share Index (TASI) is a major stock market index that tracks the performance of all companies listed on the Saudi Stock Exchange. The index has a base value of 1000 as of 1985 and it was reorganized on June 30, 2008.
The Tadawul All Share Index is Saudi Arabia's main market index. Tadawul also measures a parallel equity market, NOMU, which provides an alternative way for companies to go public.
The index was launched in 1985 with a base value of 1,000 and was restructured in 2008.
Companies represented on the index include banks such as the Arab National Bank (Alahli), Al Rahji, and Riyad, petrochemical companies like SABIC, telecom companies like STC, mining companies like Ma'aden and of course Aramco, one of the largest companies in the world.
How to invest in the Tadawul All Shares Index (TASI)?
An index like Tadawul All Share (TASI) is a hypothetical basket of stocks, so it cannot be invested in directly. But there are investment products that track indexes available through product providers and fund issuers or instruments you can leverage to replicate an index investment.
The truth is that there are both advantages and disadvantages to each, and these could help you decide which option is right for you, considering your investment strategy, risk tolerance, investment goals, and time horizon.
1. Direct investments in top All Share Index companies' stocks
When you buy shares of stock in individual businesses, you become a part owner of the company. That means you get a share of the profits or losses, based on how well the company does.
Individual stocks can have good performance over time, but they may be volatile in the short term, fluctuating massively, which comes along with risks. It’s not unusual for high-flying stocks to decline 20-30% (or more) each year on their way to long-term outperformance. On the other hand, a strong stock might go up 50% or more in a single year, especially if the overall industry or sector is hot.
In general, in the short run, stocks may rise and fall for many reasons, and market sentiment often determines how a stock performs day to day. In the long term, however, a stock more closely follows the company’s growth. As the company expands its profits, usually, the stock will tend to rise as well.
For example, Saudi Arabia’s Tadawul All Share Index (TASI) ended 2022 with a decline of 7.1%, or 804 points, at 10,478 points. This is the first loss recorded by TASI since 2015, when it dropped 17%. However, some of the stocks ended the year with positive returns, while others with double-digit losses.
If you are looking for a full replication of the Tadawul All Share (TASI) index your portfolio should hold all the stocks in the index and replicate as closely as possible the weighting of each financial instrument in the index. Additionally, such a strategy requires adjustments every time the weight of a stock in the index increases or decreases significantly. Such monitoring and subsequent rebalancing require a reasonable time allocation and a significant capital requirement.
This is one of the reasons behind the growing popularity among investors of index funds and exchange-traded funds (ETFs) as more attractive and affordable investment options.
2. Investing in ETFs tracking the Tadawul All Shares Index (TASI)
An ETF might be a higher-priority investment if you are an investor, seeking diversification and if you set objectives for the long-term.
When you invest in ETFs, you invest in many securities rather than just one company. An ETF can be made up of hundreds or even thousands of stocks (or other assets), allowing you to diversify your portfolio with a single investment.
Sometimes, investors may wish to quickly gain portfolio exposure to specific sectors, styles, industries, or countries but do not have expertise in those areas. Given the wide variety of sector, style, industry, and country categories available, ETF shares may be able to provide an investor easy exposure to a specific desired market segment.
If you want an ETF with top Saudi companies' representation, you might consider iShares MSCI Saudi Arabia ETF. BlackRock's iShares is the largest provider of ETFs as calculated by assets under management.
With net assets of almost $1B, The iShares MSCI Saudi Arabia ETF (KSA) is the largest exchange-traded fund (ETF) that seeks to track the investment results of an index composed primarily of All Share Index components. It replicates MSCI Saudi Arabia IMI 25/50 Index.
Why iShares MSCI Frontier and Select EM ETF:
- Diversification and exposure to All Shares index top components, including Aramco, Al Rahji Bank, Saudi National Bank "Alahli Bank", Saudi Basic Industries "SABIC", Saudi Telecom "STC", Saudi Arabian Mining "Maaden", RIYAD BANK. and more!
- One-click access to a virtually untapped investment portfolio with a significant TASI index exposure and correlation.
- Trade in any direction and use leverage to hedge your Tadawul stock portfolio.
3. Investments in the TASI Index via futures contracts?
Indices futures contracts are for speculating on the price movements of various stock indices, such as the Dow Jones, Nasdaq 100, or Tadawul All Share Index. Like commodities futures, traders can choose whether to speculate on price movements or hedge with multiple positions to manage the risk.
For example, if a trader bought a futures contract and the price of the index rose and was trading above the original contract price at expiration, then they would have a profit. Alternatively, if the index falls, they would have a loss.
The expiration of index futures contracts doesn’t require the delivery of a physical asset. Instead, it is settled with cash. The amount of cash is dependent on the difference between the entry and exit prices of the contract.
MT30 Index Futures is the first derivatives product offered by Tadawul. This product is a cash-settled index futures contract based on the MSCI Tadawul 30 index (MT30). The MT30 index provides investors with a benchmark of the largest and most liquid securities listed on the Saudi Stock Exchange (Tadawul).
The launch of the Derivatives Market is a step forward in Tadawul’s efforts to develop the capital market and broaden its product offering. The upgrade to Emerging Market status by MSCI and major Index providers of global equity indices, from its previous “Standalone Market” status, has brought significant benefits to the Saudi Stock Market.
The launching of the MT30 Index Futures contract with the MSCI Tadawul 30 (MT30) index as the underlying, provides investors with hedging tools and offers another opportunity to trade and broaden exposure to the Saudi market.
Tadawul All Shares Index (TASI) Predictions for 2023 and Beyond
The TASI increased 405 points or 3.87% since the beginning of 2023, according to trading with derivatives that track this benchmark index from Saudi Arabia.
Historically, the Saudi Arabia Stock Market (TASI) reached an all-time high of 20966.58 in February of 2006. But what are experts’ predictions for the next months and years? Which sector is expected to perform better?
The Tadawul All Share Index (TASI) is expected to trade at 10.833 points by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, the agency estimates it to trade at 10193 in 12 months' time.
To find out more about the All Share Index outlook, visit our research and analysis of the top 10 components:
Tadawul All Share Index (TASI) Trading Hours
The trading hours for the Tadawul All Share Index (TASI) are typically from Sunday to Thursday, with the following schedule:
9:30 AM to 10:00 AM Kingdom of Saudi Arabia local time (GMT+3)
Regular Trading Session
10:00 AM to 3:00 PM Kingdom of Saudi Arabia local time (GMT+3)
Closing Auction Session
3:00 PM to 3:10 PM Kingdom of Saudi Arabia local time (GMT+3)
The trading hours are subject to change, especially during holidays or special circumstances. The market will be closed during these Official Holidays in the Kingdom of Saudi Arabia are:
Saudi Founding Day 22 February National Day of Saudi Arabia (23 September) Eid Al-Fitr and Eid Al-Adha
Tadawul All Shares Index (TASI) History
The TASI Index has been a key component of the Saudi Arabian financial landscape for much of its existence, acting as a benchmark for investors and displaying the success of the top businesses in the nation. The index has seen periods of stability and volatility that have been influenced by regional and global economic forces.
The TASI Index has garnered more interest over time from domestic and foreign investors, regulatory agencies, and market analysts. Its performance is keenly watched as a sign of the Saudi stock market's general health and direction.
The TASI Index is projected to see future developments as the Saudi Arabian economy continues to diversify and grow, possibly including the introduction of new firms and the adjusting of its composition to reflect altering market dynamics.
The TASI Index is used by investors and market participants as a gauge of market sentiment as well as a tool for portfolio management and investment decision-making. The index provides a platform for businesses to get visibility and financing, which helps the Saudi capital market expand and thrive.
According to Tadawul, the TASI Index started its journey several decades ago with a base level of 1,000 points. It comprises a selected group of companies with a combined market capitalization in the millions of Saudi riyals. As of today, the TASI Index stands at 11,310.26 points. The index includes 224 companies, collectively holding a market capitalization of 3.03 billion Saudi riyals.
In its early years, the TASI Index experienced various fluctuations. One significant milestone occurred in 2008 when the index decline 56%. This event marked a challenging period for the Saudi stock market. Over the years, the TASI Index demonstrated resilience and growth, the index rebounded from its downturn and gradually recovered. However, the index did not reach its all-time high, which was recorded in 2005 at the level of 16,713 points.
TASI Index Highs and Lows (2005 - 2022):
Year Closing (points) Change (points) Change (%) 2005 16713 +8507 +104% 2014 8333 (203) (2%) 2006 7934 (8779) (53%) 2015 6912 (1421) (17%) 2007 11039 +3105 +39% 2016 7210 +298 +4% 2008 4803 (6236) (56%) 2017 7226 +16 +0.2% 2009 6122 +1319 +27% 2018 7827 +601 +8% 2010 6621 +499 +8% 2019 8389 +562 +7% 2011 6418 (203) (3%) 2020 8690 +301 +4% 2012 6801 +383 +6% 2021 11282 +2592 +30% 2013 8536 +1735 +26% 2022 10478 (804) (7%)
The TASI Index has become a well-known benchmark on the Saudi Arabian stock market, representing the performance of top corporations and offering helpful perceptions of the economic climate of the nation. The TASI Index has a long history and is still evolving today, shaping Saudi Arabia's investment environment.
For some, their belief in investing in individual stocks is so deep, that it's almost like a religion. They will tell anyone who is willing to listen to buy stocks they have researched thoroughly and hand-picked. Others sleep better at night knowing that their portfolio is well diversified through exchange-traded funds (ETFs). There are also investors whose risk appetite is higher. Many of them will choose more speculative financial instruments, such as future contracts.
Investments in the Tadawul All Share Index can provide additional diversification to an equity portfolio, but might come along with risks, like any kind of investment, especially during economic and geopolitical turbulent periods.
Investors and speculators have the possibility to choose their own investment method, considering personal circumstances such as risk tolerance, investment objectives, or horizon.
If you are looking to invest in the Tadawul All Share Index, make sure you choose the way that best fits you. The iShares MSCI Saudi Arabia ETF (KSA) is one accessible and cost-effective option.