Indices have become a popular instrument nowadays because, in addition to providing those looking to diversify their portfolio with a unique instrument, they can also be used to determine the economic health of certain countries or sectors of the stock markets by tracking the performance of various top companies.
A stock market index essentially measures the performance of a selection of companies within a particular sector of the market by tracking their share prices, using a weighted average to show the results. This provides an overview of a section of the market and allows CFD traders to invest in the price movements of a basket of stocks at once. For example, one of the largest indices in the US is the S&P 500 index which measures the performance of the top 500 stocks in the US by market capitalisation.
The S&P 500 can therefore be seen as an indicator of the health of the US economy and the overall US stock market performance. Here in the Middle East, we have a few important indices including the Dubai Index and the Saudi Tadawul All-Share Index.
Let’s take a closer look at these two indices and discuss how this information can be useful to those interested in trading Saudi indices with iFOREX as CFDs.
Some of the large brands listed on the DFM include the Emirates Islamic Bank, Dubai Refreshments Company, Hits Telecom Holding, Air Arabia, and Arabtec Holding.
The Dubai Financial Market General Index (DFMGI) (or the Dubai Index for traders using the iFOREX platform) is used to track the performance of DFM-listed companies.
This year, the DFMGI has been closely watched as the region waits in anticipation for its economic recovery from the damaging effects of the Covid-19 pandemic, which could be good news for property developers. In May, the DFMGI increased for a third session, leaping up by 0.8% on May 10th, mostly due to Emaar’s 2.8% growth.
Since the beginning of 2021, the index has been on an uncertain path, with some highs, lows and plateaus, however it is now trading higher than where it started off. Data from iFOREX’s Dubai Index, which tracks the DFMGI, shows that it began at a price of 2509.69 on the 3rd of January, and then rose by 9.3% over the month, to close at 2744.13 on the 21st of January. From there the index lost ground when it fell by 8.2% over the next month, to land on 2517.44 on the 24th of February.
Then the Dubai Index hovered up and down, eventually landing at 2689.81 on the 9th of May, which is an overall increase of 7.1% since the beginning of 2021. All in all, this is positive news for those who are waiting patiently for the region’s economic rebound.
The Tadawul is Saudi Arabia’s prime stock exchange, and the Tadawul All-Share Index (TASI) is a large index tracking the performance of the stocks listed on the Tadawul. This index reached its all-time high back in February of 2006 when it hit 20,634.86.
The TASI has roughly 250,000 trades per day at an average trading amount of about 880 Saudi riyals. The Tadawul has worked its way up to 17th place in the world when it comes to liquidity, which means it has moved up three places since the end of 2020. Since February this year, the index has been on the rise, gaining a total of 39.6% since the markets opened on the 3rd of January 2021. Data shown by the Saudi All-Share Index (which tracks the TASI on the iFOREX platform) shows that the TASI began the year on a price of 8616.24 on the 3rd of January, and then hit a minor slump of 0.5% to land at 8570.85 just a month later, on the 3rd of February. Thereafter, the index continued on an upward trajectory of 9%, albeit with a small decline here and there, to reach a high of 10538.71 on the 28th of April.
Trading Middle East Indices as CFDs
As you can see from the numbers we’ve presented, volatility and indices go hand in hand, as many factors can impact their price movements. This sort of volatility can present both opportunities and risks for those who engage in CFD trading.
CFDs, or Contracts for Difference, allow you to take advantage of price movements in both directions—increases as well as decreases—of a wide variety of indices such as the Dubai Index or the Saudi All-Share Index, without having to purchase the underlying asset. Essentially, you’re able to trade on volatility, so if you expected the price to go up, you’d open a ‘Buy’ deal or ‘Go long,’ whereas if you expected the price to go down, you’d open a ‘Sell’ deal or ‘Go short.’
iFOREX is a leading broker offering hundreds of CFD instruments including the indices we’ve just mentioned as well as commodities, shares of today’s top companies, ETFs, cryptocurrencies and forex pairs. Those looking to begin trading Saudi indices with iFOREX as CFDs can access the financial markets with the innovative iFOREX trading platform, which includes a wide range of advanced tools and features including trading signals, market alerts, and detailed analysis charts.
Before trading Saudi indices with iFOREX as CFDs, be sure to take advantage of iFOREX’s hallmark educational resources to ensure you have a well-rounded understanding of how trading index CFDs works. Choose from trading guides, video tutorials, and 1-on-1 training with a live trading coach who can help you develop your skills at your own pace.