Indices inclusion expected to spark huge Saudi fund inflow

Dubai - Holdings by foreign investors in listed Saudi firms to rise by 10 per cent.

Saudi Stock Exchange marked the implementation of the first tranches of the much-anticipated inclusion into the FTSE Russell and S&P Dow Jones Indices on Monday amid rising expectations that the move will spark the inflow of billions of dollars in passive fund.
The head of Saudi stock market Tadawul said he expects the inclusion by two leading providers of global equity indexes would see holdings by foreign investors in listed Saudi firms to rise by 10 per cent when their shares are included in MSCI and FTSE's emerging-market indices.
The inclusion will occur in five tranches over the next 12 months, the first of which was completed on Monday. This initial tranche of 25 per cent will be split over March 2019 and April 2019 (10 per cent and 15 per cent respectively) to ensure a smooth transition. The remaining 75 per cent will be implemented in conjunction with quarterly reviews in June 2019, September 2019 and March 2020, Tadawul said in a statement.
Khalid Al Hussan, chief executive of Tadawul - the Middle East's largest exchange with a total market capitalisation of around $541.3 billion - was quoted as estimating that the exchange would see around $5 billion of passive inflows coming from FTSE and around $10-11 billion from MSCI and some inflows from S&P.
He said the inclusion into the pre-eminent indices was a testament to growing investor confidence in the Saudi market and reflects the successful implementation of far-ranging capital market reforms in line with the Financial Sector Development Program and Vision2030 that have further enhanced the accessibility of Tadawul to international investors. Saudi shares joined the FTSE Emerging All Cap Index with a weighting of 2.9 per cent. In May, Saudi shares will join the MSCI Emerging Markets Index.
Waqas Samad, CEO of FTSE Russell, said Saudi Arabia's promotion to emerging market status within FTSE Russell's global equity benchmarks is a significant achievement.
"The CMA and Tadawul have long been committed to improving Saudi Arabia's capital markets infrastructure and today marks a culmination of their efforts to meet the rigorous requirements for inclusion. FTSE Russell has a strong track record of working closely with exchanges, regulators and market participants in the Middle East to help meet the demand from international investors for benchmark and analytic solutions to facilitate their investments into the region. We look forward to remaining at the forefront of providing innovative solutions for our global clients."
Inclusion of Saudi Arabia into the S&P Dow Jones Emerging Market Indices' (DJI) Global Benchmark Indices (BMI) commenced on Monday with the first of two phases, with the second phase to be completed in September 2019. They are eligible for inclusion at 50 per cent of float-adjusted market capitalisation (FMC) from Monday and at 100 per cent of FMC on September 23, 2019.
"On completion of the first phase, Saudi Arabia's recent move in our country classification to emerging market from stand-alone is a result of an ongoing consultation with market participants. It reflects the strong consensus among members of the global investment community and recent positive market structure reforms that support foreign investment in the country. S&P Dow Jones Indices looks forward to continuing to provide innovative index-based solutions in the Middle East region," said Alex Matturri, CEO at S&P Dow Jones Indices.
Foreigners have been ploughing more than $2.1 billion year-to-date into the Saudi market. The Saudi index is up nearly 9.6 per cent, outperforming its Gulf peers.
Foreigners excluding strategic investors own less than two percent of Saudi stocks, analysts have said. Currently, foreign ownership of listed stocks is capped at 49 per cent, according to the latest available data.
- issacjohn@khaleejtimes.com
 
Saudi shares close at near 4-year high
Saudi Arabia's benchmark stock index closed at its highest in nearly four years, Reuters adds.
Saudi's Tadawul index rose 1.1 per cent with 159.2 million shares traded for a value of SR3.6 billion ($960 million).
The Abu Dhabi index rose 1.8 per cent, lifted by a 3.2 per cent rise in First Abu Dhabi Bank.
International Holding climbed 5 per cent after it called a shareholders' meeting to approve a capital increase by SR1.31 billion.
In Dubai, the index was up 1.6 per cent with Dubai Islamic Bank gaining 3.2 per cent. 
 
 
 
Saudi's Tadawul index rose 1.1 per cent with 159.2 million shares traded for a value of SR3.6 billion ($960 million).