In a bid to broaden its economic horizons, the entity overseeing Saudi Arabia’s equity market has secured a significant share of the Dubai Mercantile Exchange. The acquisition marks a strategic move towards diversifying revenue streams and delving into the trading spheres of crude oil, metals, and agriculture.
The Tadawul Group, the custodian of the Saudi stock market, has invested in a 32.6% stake of the Dubai-based commodity exchange, amounting to an investment of 107 million riyals (approximately $28.5 million). This transaction positions Tadawul Group as a joint predominant shareholder alongside the United States’ CME Group.
With this new alliance, the Dubai Mercantile Exchange will undergo a rebranding to become known as the Gulf Mercantile Exchange. The agreement also paves the way for Tadawul Group to potentially acquire a majority stake in the exchange after a period of four years, should it choose to exercise that option. The expanded focus will include trading opportunities in energy, precious metals, and agriculture commodities.
Although the deal is set to introduce a variety of trading commodities, the exchange will continue to host the Oman Crude oil futures contract without involving the trading of Saudi oil.
The investment aligns with Saudi Arabia’s ambitious plans to establish itself as a central hub for the mining and processing of metals and minerals. The kingdom’s sovereign wealth fund, which holds the majority stake in Tadawul Group, plays a crucial role in the nation’s broader strategy to capitalize on its commodities sector.
Recently, Saudi Arabia disclosed that it harbors minerals and metals worth an estimated $2.5 trillion, nearly doubling previous evaluations. Under the leadership of Crown Prince Mohammed bin Salman, the kingdom is also keen on making international investments to secure critical minerals such as copper, nickel, lithium, and iron ore. These materials are essential for manufacturing a range of high-tech products, including batteries for electric vehicles and solar panels.
The strategic focus is not limited to domestic initiatives, as the kingdom seeks to process these materials domestically to support an expanding industrial network.
The CEO of Tadawul Group, Khalid Al Hussan, expressed optimism regarding the investment in DME, highlighting it as a stepping stone to new growth opportunities. He emphasized the geographical advantages and the potential to cater to market demand from both eastern and western regions.