Saudi Arabia wins MSCI emerging market status

Index compiler impressed by “speed of change” in kingdom’s equity market

Index compiler MSCI praised the kingdom's efforts to develop its capital markets as part of its Vision 2030 economic diversification efforts. Reuters

Saudi Arabia has won a landmark inclusion in the MSCI emerging markets index, paving the way for an estimated $40 billion of additional flows to the kingdom’s $500 billion-plus stock market.

The inclusion of Saudi Arabia in the widely-tracked benchmark gives the kingdom’s stocks a representative weighting on a pro forma basis of approximately 2.6 per cent of the index with 32 securities, the index compiler said late Wednesday in a statement.

The MSCI promotion follows a similar move by FTSE Russell in March and is a second achievement for the kingdom, which has been implementing a series of reforms to develop its capital markets in line with its Vision 2030 economic diversification strategy.

“International investors were impressed by the speed of change in the accessibility of the Saudi Arabian equity market and the level of commitment that the Capital Market Authority and Saudi Stock Exchange (Tadawul) have demonstrated,” said Sebastien Lieblich, MSCI managing director and global head of equity solutions.

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“Their expectation now is that the current privatisation effort in Saudi Arabia will continue to grow the investable opportunity set available to them and, all other things being equal, contribute to an increased weight of Saudi Arabia in the Emerging Markets Index in future.”

The inclusion process has two steps – the first will coincide with the May 2019 Semi‐Annual Index Review, and the second will take place as part of the August 2019 Quarterly Index Review.

MSCI EM status is expected to help the country attract billions of dollars into the region’s biggest stock exchange, which has gained 15 per cent so far this year on anticipation of the index compiler move.