Saudi CMA, MSCI Inc To Reintroduce Stock Indexes

By Yomna Yasser On May 1, 2012

Saudi Arabia’s Capital Market Authority, or CMA, said Monday it has singed an agreement allowing widely followed index compiler MSCI Inc. MSCI -0.65% to use stock market data to create and issue indexes on the kingdom’s equity market, two years after negotiations failed between the two parties.

MSCI will reintroduce coverage of the Saudi equity market with the release of standalone country indexes, the CMA said in a statement posted on the Saudi bourse website.

The reintroduced MSCI Saudi Arabia Domestic Indexes, including large cap, mid cap and small cap indexes, are aimed at institutional investors wishing to invest in Saudi Arabia, and who aren’t constrained by foreign ownership limits.

MSCI will also reintroduce the MSCI GCC Countries Index (MSCI GCC Countries ex Saudi Arabia Index and MSCI Saudi Arabia Domestic Index) and the MSCI Arabian Markets Index (MSCI Arabian Markets ex Saudi Arabia Index and MSCI Saudi Arabia Domestic Index), as well as domestic versions of existing regional indexes.

MSCI will make the MSCI Saudi Arabia Domestic Indexes, and related regional indexes, available in June 2012.

The widely tracked and influential index provider said in 2010 that it would drop all indexes with Saudi stocks after failed negotiations with the kingdom’s bourse, better known as Tadawul, over the licensing of information.

Saudi Arabia–the largest, most liquid and yet least accessible market in the Arab world–is considering opening its stock market to foreign investors in a move that could help erode the dominance of local retail investors and turn the local market into a regional trading hub. But when the kingdom will make its final decision on this bold proposal, which could earn Saudi Arabia much-coveted MSCI frontier market status, remains uncertain.

The CMA has already taken small steps to partially open up the market. After allowing access indirectly through the use of swaps in August 2008, it decided to open the market to cross-listing by qualified foreign firms in January this year.