Saudi and Kuwait stocks react to FTSE

The Saudi stock index fell yesterday after news that index compiler FTSE had decided to delay including Riyadh in its secondary emerging market index, while Kuwaiti blue chips were strong after FTSE included Kuwait.

In its annual country classification review on Friday, FTSE praised Riyadh’s market reforms but said it would need more time to evaluate their practical impact. It will therefore assess Saudi Arabia again next March: “It is anticipated that Saudi Arabia will meet the requirements for inclusion as a Secondary Emerging market from early 2018.”

Khalid Al Hussan, the chief executive of the Saudi exchange, told Al Arabiya television that Riyadh could still enter the index as soon as in September 2018, attracting between US$2.5 billion and $3bn of passive funds when it did so. The Saudi index had dropped 0.6 per cent last week amid rumours that FTSE’s decision would be negative. Yesterday it lost a further 0.7 per cent and blue chips that would probably be part of the emerging market index bore the brunt of selling.

FTSE decided that Kuwait would enter its emerging market index in September 2018. Though the news had been expected by many investors, confirmation of the upgrade boosted stocks such as the region’s largest warehousing company Agility, which climbed 1.2 per cent, and National Bank of Kuwait , which jumped 3.3 per cent.

Kuwait’s index of the top 15 most valuable shares added 1.9 per cent, but the main index fell 0.1 per cent.

It is not clear that FTSE index inclusion will bring much money to Kuwait, however. Before the decision, some analysts were talking of passive fund inflows of several hundred million dollars, but in a report on Saturday, Arqaam Capital calculated Kuwaiti stocks might have a combined weighting of only 0.11 per cent, resulting in $151.5 million of inflows.

Abu Dhabi’s index rose 0.3 per cent on the back of blue chips; First Abu Dhabi Bank added 0.5 per cent.

The Dubai index fell 0.5 per cent as theme park operator DXB Entertainments lost 2.9 per cent. But Gulf General Investment rose 2.2 per cent after saying it had completed a Dh2.1bn debt restructuring that would give it until 2023 to dispose of non-core assets.