Aramco IPO not a condition in MSCI upgrade for Saudi
The global index provider MSCI’s decision to include Saudi Arabia in its emerging market index is independent of its stock market’s ability to absorb the estimated $100 billion initial public offering of Saudi Aramco, MSCI’s regional chief said.
“The Aramco IPO and the decision by MSCI is completely exclusive – independent of one another. So whether or where it lists, or how it lists is independent of how MSCI will do its decision to classify Saudi Arabia,” Robert Ansari, an executive director and head of Middle East at MSCI said in Abu Dhabi yesterday.
“On paper, everything Saudi Arabia had to do has been done.” He added that MSCI’s decision is contingent on how well the structural changes the kingdom has implemented in its financial market are performing and what is the investor feedback to them.
MSCI, whose emerging market gauge is tracked by fund managers with $1.7 trillion in assets, will announce a decision on whether to upgrade Saudi stocks to EM status in June, after the index provider put the country’s market on a watchlist for inclusion last year.
The much-anticipated upgrade follows a series of market reforms initiated by the kingdom, the world’s biggest oil exporter and the region’s top economy, designed to attract international institutions through the easing of ownership requirements of equities by foreign investors, reducing settlement cycles and introducing short-selling.
If the kingdom does not get an approval from investors in June and remains on the watchlist, it will again be reviewed for inclusion in November 2019, Mr Ansari said on the sidelines of the Mena Investment Congress.
The Aramco
IPO and the decision by MSCI is completely exclusive – independent of one another ROBERT ANSARI MSCI executive for Middle East
Saudi Arabia could account for a 2.5 per cent weight of MSCI’s emerging market gauge and if the IPO for Aramco, the world’s biggest oil producer, happens as planned this year, the anticipated weight would almost double to about 5 per cent, he said.
If Saudi Arabia is upgraded then it will become part of the EM index effective June 2019. In the meantime, if the Aramco IPO happens and is deemed an “eligible security”, it could be a part of the MSCI’s index, Mr Ansari said.