Saudi stock market aims to allure $5 bln in second phase of MSCI upgrade

The Institute of International Finance (IIF) said on Thursday that after the full inclusion on the MSCI emerging markets Index (EM Index), Saudi Arabia’s Tadawul is expected to attract an additional $5 billion in equity inflows.

Saudi Arabia’s stock market, worth approximately $549 billion, is the largest in the region and it will have a weight of 2.8 percent on the MSCI index.

The IIF said investor appetite for Saudi equities spiked in August and foreign equity inflows to the Kingdom surpassed those of India and China during first eight months of this year, a remarkable development given that Saudi Arabia’s economy is just a fraction of the size of the two other countries.

“In the absence of major domestic and external shocks and further deterioration in emerging market (EM) investment sentiment, Saudi Arabia can count on additional equity inflows from active investors whose portfolios are benchmarked to the MSCI EM index.” IIF MENA chief economist Garbis Iradian said.

Tadawul expects ownership of equities by foreigners to triple by 2022, driven by flows from index trackers, as the country awaits the listing of Saudi Aramco.

The IIF said that after a positive performance in the first quarter of this year, renewed US-China trade tensions sparked a sharp decline in equity flows to most emerging markets.

The Kingdom received more than $4.5 billion in foreign equity inflows in May and $2 billion in the first three weeks of August 2019, becoming the top equity investment destination among emerging markets, said IIF.

Source: Banker Middle East