As Saudi opens to foreigners, stock index jumps to 2-month high

Sunday, Jun 14, 2015

Dubai: As investors rejoiced with the opening of the Saudi markets to foreigners, the Tadawul index jumped to its highest level in a month on Sunday.

The Saudi’s Tadawul All Share Index ended 1.33 per cent higher at 9,644.57, after hitting a high of 9,647.50.

“There has been a lot of interest in Saudi before the opening of the market on Monday,” Sebastien Henin, head of asset management at The National Investor told Gulf News.

On Monday, the Saudi equity markets will open for qualified foreign institutional investors for the first time, an unprecedented move, according to industry watchers, that would eventually lead to billion of dollars of capital flows in the world’s biggest crude oil exporter.

Saudi’s market cap stands at more than $550 billion (Dh2 trillion), with an average daily liquidity of more than $2.3 billion, making it the seventh largest and the fourth most liquid market among the emerging markets.

Saudi, which is part of the group of twenty nations, is one of the last country of the major economies of the world that allowed foreign investors’ direct access to its capital market.

By that, the Saudi capital market would be a part of the major global market, according to Mohammed Aljadaan, chairman of Capital Market Authority of Saudi Arabia.

The “foreign investors represented in the Qualified Financial Institutions (QFIs) are expected to contribute in reducing high volatility in prices,” Aljadaan said in a statement.

The CMA expects the market opening to enhance the efficiency and motivate listed companies to improve the levels of transparency, disclosure and governance practices.

MSCI, which currently has a stand-alone index for the country, expects to include Saudi in its emerging market index only by mid 2017.

“In terms of timing, if all stars were to align, one could imagine the introduction of Saudi stand-alone index into MSCI’s flagship index of emerging markets would be in June of 2017,” Sebastien Lieblich, head of index research at MSCI told Gulf News. The MSCI plans to launch a standlone index for the world’s biggest exporter of crude oil.

After the inclusion, the weighting of Saudi Arabia would be equal to the likes of Poland or Turkey, with a weightage of around 7 per cent, analysts say.

“Once included, we see Saudi accounting for only 1.7 per cent of the MSCI EM index owing to foreign ownership limits; although this should be sufficient to attract $13.7 billion of active and passive flows in to the market,” Bank of America Merrill Lynch said in a note.

By Siddesh Suresh Mayenkar Staff Reporter