RIYADH (Reuters) - Global index provider FTSE Russell said on Thursday it had launched a bond index for Saudi Arabia to measure the performance of fixed-rate, local currency government bonds, a move which could lead to new inflows to the Saudi market.
The FTSE Saudi Arabian Government Bond Index will cover sukuk and non-sukuk government bonds with at least one year to maturity and a minimum amount outstanding of 1 billion riyals ($266.65 million). Sukuk are Islamic bonds.
Riyadh's government bond market will be reviewed by FTSE Russell in its Fixed Income Country Classification review next month, which could lead to an inclusion of Saudi domestic bonds in the FTSE Emerging Markets Government Bond Index (EMGBI).
As of July 31, 2020, 45 Saudi securities with a total market value of 273.2 billion riyals ($72.9 billion) were eligible for inclusion in the index, according to the FTSE statement.
Saudi Arabia opened its stock market to foreign investors in 2015. It has since introduced a raft of reforms to make its capital markets attractive to foreign investors and issuers and to expand its institutional investor base, as part of an ambitious plan to diversify the economy away from hydrocarbons.
Riyadh began offering local currency bonds in monthly auctions in 2015 to help cover a huge budget deficit and it launched monthly sukuk issues in mid-2017.
In 2018, the Saudi stock exchange began listing domestic government bonds to facilitate riyal issuance by encouraging secondary market trade.
Since 2016, Saudi Arabia has also become a regular debt issuer in the international markets, borrowing tens of billions of dollars to boost state coffers.
The Saudi market joined the FTSE Emerging All Cap Index and the MSCI Emerging Markets Index last year, triggering more foreign fund inflows.
(Reporting by Marwa Rashad with additional reporting by Davide Barbuscia; Editing by Mark Heinrich)