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Equity Ratings

Equity ratings are a measure of the efficiency of stocks which are provided as collateral against margin financing. The equity rating declines as the quality of the purchased shares or the intended shares falls; certain stocks aren't considered for financing.

In addition, investment firms rate all listed shares based on historical performance. Margin clients are able to utilize the margin provided to them based on the rating of each company.

If the client's capital is SAR 1 million and he receives a margin of SAR 1 million (maximum buying power becomes SAR 2 million), and the client intends to buy a stock with a rating of 60%, the client may use 60% of the maxium buying power to buy the share (SAR 1.2 million). If the client does buy into the stock using the maximum buying power (SAR 1.2 million), he will still be able to use the remainder of the buying power (SAR 800 thousand) to buy stocks with 100% rating, or use SAR 400 thousand to buy stocks with 80% rating, or a combination of both. It is important to note that should the client use the maximum buying power to buy stocks with 60% rating, he will not be able to buy any other stocks with 60% rating or less.

Derayah’s margin clients may view the latest version of Equity Ratings by logging into their portfolios on Derayah’s website

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