Saudi Arabia's benchmark stock index closed at its highest in nearly four years on Monday as bank shares rose on its first day as a member of FTSE Russell's emerging-market index, which is expected to attract billions in passive fund inflows.
Saudi's Tadawul index will have a weighting of 2.9 percent in the FTSE Emerging All Cap Index and later this year will join the MSCI emerging market benchmark. The market is positioned for passive fund inflows of around $20 billion.
The kingdom is hoping its inclusion in the indexes will fuel its drive to become a major destination for foreign capital, after its global reputation was tainted by the murder of journalist Jamal Khashoggi in October.
In the short term, the upside is limited since this was a well-flagged event, Al Mal MENA Equity Fund said in a note. In the long-term there are positive implications not just for the Saudi market but for the region as a whole.
With foreigners, there will be more institutional participants who are research-driven and bringing more discipline to the market, the note added.
Saudi Arabia's listed companies could see holdings by foreign investors rise to 10 percent when shares are included in index providers MSCI and FTSE's emerging markets indices, Tadawul's Chief Executive told Reuters.
The index has gained 10 percent this year, outperforming its major Gulf peers, and foreigners have led the buying, with foreign investors now net buyers of 9.6 billion riyals of stocks year-to-date, Arqaam Capital said.
Saudi's Tadawul index .TASI rose 1.1 percent with 159.2 million shares traded for a value of 3.6 billion riyals ($960 million). Al Rajhi Bank 1120.SE gained 0.8 percent and blue-chip petrochemical maker Saudi Basic Industries (SABIC) 2010.SE added 1 percent.
"We expect SABIC to see the biggest inflow of more than $110 million while Al Rajhi and National Commercial Bank are close behind," Nick Wilson, chairman of the Gulf Investment Fund Plc, said.
Abdullah Abdul Mohsin Al Khodari Sons surged 10 percent. The stock has risen since shareholders voted against the dissolution of the company.
The Abu Dhabi index .ADI rose 1.8 percent, lifted by a 3.2 percent rise in First Abu Dhabi Bank FAB.AD .
International Holding IHC.AD climbed 5 percent after it called a shareholders' meeting to approve a capital increase by 1.31 billion dirhams ($357 million).
Dana Gas gained 1.8 percent. On Sunday, the firm approved plans for a sukuk buyback and said it plans to seek approval to buy back 690 million shares.
In Dubai, the index was up 1.6 percent with Dubai Islamic Bank gaining 3.2 percent. The emirate's largest listed developer, Emaar Properties, rose 2.2 percent after saying its board will meet on Wednesday to discuss the proposal for a full-year dividend.
Marie Salem, director capital markets at FFA Private Bank Dubai, said foreigners are continuing to accumulate bank shares across the United Arab Emirates.
Qatar's index increased 1.1 percent. Qatar Islamic Bank added 3 percent and the Middle East's largest lender, Qatar National Bank , rose 1.5 percent.
Egypt's blue-chip index was down 0.8 percent with its major lender Commercial International Bank shedding 1.7 percent.
($1 = 3.6728 UAE dirham) ($1 = 3.7502 riyals)
(Reporting by Shakeel Ahmad and Abinaya Vijayaraghavan in Bengaluru and Saeed Azhar in Dubai; Editing by Hugh Lawson) ((firstname.lastname@example.org;))