MARKET TALK: Funds Could Allocate $13B If Saudi Enters EM

Wednesday, Jul 18, 2012

1207 GMT [Zawya Dow Jones]--An upgrade to emerging market status for Saudi Arabia could see as much as $13 billion reallocated to the Middle East's biggest economy, says Bank of America Merrill Lynch in a report. Reckons the kingdom's market could potentially have a 3% weight in MSCI's emerging market index, twice that of Turkey, if it were to graduate directly to the benchmark status. Notes, in this scenario, the market stands to benefit from a reallocation of as much as $13.4 billion, or 3% of the $445 billion currently invested in global emerging market funds, from other markets. MSCI has said that direct access to Saudi equity would make it eligible for consideration for either frontier or emerging markets status. BoAML says if Saudi is included in the frontier index, it would have a 55% free-float weight. "There is currently $2.5 billion of assets in Global Frontier Market funds. If Saudi were to achieve Frontier Market status, then it would stand to gain half of these funds." (nikhil.lohade@dowjones.com; Twitter: @ZDJnews)

(END) Dow Jones Newswires

18-07-12 1208GMT