Saudi Arabia’s EM index listing to draw $5b-$7b
FTSE RUSSELL MOVE SEEN TAKING EFFECT IN A YEAR
Global index provider FTSE Russell plans to include Saudi equities in its emerging market index in a year from now. The move, announced yesterday, is expected to result in an inflow of up to $7 billion (Dh25.69 billion), according to fund managers, as the region’s biggest equity market is expected to have a weightage of 2.7 per cent on the index. That will make it the biggest market in the Middle East on the gauge.
The inclusion of Saudi equities, which has a market capitalisation of $500 billion, is considered key in attracting billions of dollars in passive and active funds. Market participants will await the announcement from the MSCI, another index provider, in June, which has potential to attract more than $40 billion in fund flows.
“Saudi Arabia’s inclusion in global benchmarks will further strengthen our position as the largest market in the Middle East region and we will work closely with the market during the transition period,” Mohammad Al Kuwaiz, Chairman, Capital Markets Authority (CMA), said in a statement.
After the announcement, the Tadawul index edged lower after registering gains for seven straight sessions. The index closed 0.37 per cent lower to 7,870.87, after gaining 2.45 per cent in the past seven sessions.
“Inclusion of Saudi Arabia in the FTSE emerging market index is expected to be a game changer for the local and regional stock markets,” M.R. Raghu, Managing Director, Marmore Mena Intelligence, told Gulf News. “With an estimated $200 billion of passive assets tracking the FTSE Emerging Index, the inclusion of Saudi Arabia could attract approximately $5.4 billion in passive inflows,” Raghu said.
“The CMA and Tadawul deserve much credit for the work they have done over the past few years to enhance the market’s regulatory framework and infrastructure — it has created an environment much more familiar and accessible to international investors,” said Georges Elhedery, HSBC’s CEO for Middle East, North Africa and Turkey. He expects to see at least $7 billion of inflows as a result of the inclusion.