S&P Dow Jones In­dices con­sid­ers up­grad­ing Saudi Ara­bia to emerg­ing mar­ket sta­tus

The National - News - - BUSINESS - DANIA SAADI

S&P Dow Jones In­dices has started con­sul­ta­tions to up­grade Saudi Ara­bia to emerg­ing mar­ket sta­tus, join­ing other index com­pil­ers seek­ing to re­vise their clas­si­fi­ca­tion of the big­gest Arab econ­omy.

The com­pany’s con­sul­ta­tions, which will end June 15, is be­ing un­der­taken as Saudi Ara­bia has re­vamped its stock mar­ket laws and reg­u­la­tions to be more in line with in­ter­na­tional norms and ease ac­cess to foreign in­vestors, S&P Dow Jones said in a state­ment yes­ter­day.

“S&P DJI is con­sid­er­ing chang­ing the coun­try clas­si­fi­ca­tion of Saudi Ara­bia to re­flect the progress made with re­gard to fi­nan­cial mar­ket re­forms in­clud­ing greater foreign ac­ces­si­bil­ity and align­ment with global stan­dards,” it said.

Saudi Ara­bia’s stock mar­ket, the Arab re­gion’s largest with a mar­ket cap­i­tal­i­sa­tion of about $500 bil­lion, is ini­ti­at­ing re­forms as part of plans to lure more foreign in­vestors, who cur­rently own around 5 per cent of the mar­ket.

The king­dom has im­ple­mented a slew of re­forms to help win its emerg­ing mar­ket sta­tus. FTSE Rus­sell up­graded the coun­try in March. Ri­val MSCI, which is tracked by around $1.6 tril­lion in ac­tive and pas­sively man­aged money, is ex­pected to make a sim­i­lar move next month that could pump as much as $80bn in in­flows, ac­cord­ing to es­ti­mates by Franklin Tem­ple­ton In­vest­ments.

In Jan­uary, Saudi Ara­bia made it eas­ier for in­ter­na­tional in­vestors to buy pub­licly-traded com­pa­nies by halv­ing the min­i­mum re­quire­ment of qual­i­fied foreign in­vestors to $500 mil­lion from $1bn. The king­dom also in­tro­duced short-sell­ing last year and im­ple­mented the T+2 set­tle­ment, which means that se­cu­ri­ties set­tle two days af­ter they are bought, in line with in­ter­na­tional norms.

The re­forms be­ing un­der­taken are un­der the umbrella of Vi­sion 2030, an over­ar­ch­ing eco­nomic road map that was re­vealed in 2016 and is be­ing im­ple­mented in phases.

Saudi Ara­bia, the world’s big­gest oil ex­porter, is court­ing foreign in­vestors as part of re­forms aimed at low­er­ing de­pen­dence on hy­dro­car­bon in­come and cre­at­ing new rev­enue streams in the wake of the 2014 oil price slump that saw oil drop to be­low $30 a barrel.

The up­com­ing sale of a 5 per cent stake in Saudi Aramco, the world’s big­gest oil pro­ducer, is an­other cat­a­lyst to add the coun­try to S&P DJI. The gov­ern­ment may reap as much as $100bn from the list­ing.

“The an­tic­i­pated ini­tial pub­lic of­fer­ing of Saudi Aramco has drawn sig­nif­i­cant foreign in­vestor in­ter­est,” said the com­pany. “All of these de­vel­op­ments re­in­force the need to ap­pro­pri­ately re­flect the sta­tus of Saudi Ara­bia in global in­vest­ment port­fo­lios.”

Saudi Ara­bia could have a po­ten­tial weight­ing of 2.57 per cent in S&P Emerg­ing BMI if there is full in­clu­sion and 0.28 per cent weight­ing in S&P Global BMI if there is full in­clu­sion, the com­pany said.

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