Saudi stocks posted their highest one-day gains in eight weeks before the kingdom’s stock market opens up to foreign investors for the first time today.
The Tadawul index gained 1.3 per cent at 9,644.57, led by Saudi Basic Industries and Al Rajhi Bank.
Foreign investors have long sought to invest directly in the shares of Saudi companies such as Sabic, National Commercial Bank and Saudi Telecom. Prior to the opening investors only had access to Saudi stocks via swap arrangements and exchange-traded funds,
Saudi Arabia has the largest stock exchange in the Middle East and North Africa region, and is the fourth-largest emerging markets exchange worldwide.
The Tadawul has gained 15.4 per cent this year. But market observers have cautioned against expectations of a sudden rush of foreign investment flows into the market.
“We shouldn’t expect a massive foreign inflow in the market in the coming weeks, it will probably be a gradual process,” said Sebastien Henin, the head of asset management at The National Investor in Abu Dhabi.
"The market is not yet included in the largest [MSCI] emerging markets index, meaning that investments in the kingdom will be off benchmarks and investors will probably take some time to understand the economic dynamics and improve their knowledge of listed corporates on the Tadawul."
Last week, the index compiler MSCI said that it welcomed the opening of the Tadawul to foreign investors.
It said it would gather feedback from international investors following the move, before considering including Saudi Arabia in the influential MSCI Emerging Markets Index.
Although such an inclusion could, in theory, take place as early as November next year, May 2017 is a more likely date, according to Merrill Lynch.
“Once included, we see Saudi accounting for only 1.7 per cent of the MSCI emerging markets index, owing to foreign ownership limits,” said the bank in a note published yesterday. “[However] this should be sufficient to attract US$13.7 billion of active and passive flows in to the market.”
Saudi Arabia’s Capital Market Authority declined to comment yesterday on whether any qualified foreign investors have been licensed to trade on the stock market on the eve of its opening.
The Dubai Financial Market gained 0.6 per cent at 4,098.29 yesterday, thanks to a 2.1 per cent gain by index heavyweight Emaar Properties.
Arabtec Holding stabilised after plunging 9.9 per cent on Thursday.
The shares rose 6 per cent in early trading before closing up just 0.38 per cent at Dh2.65.
Amlak Finance, meanwhile, fell for the second day in a row, closing down 10 per cent at Dh1.89.
Shares were largely unchanged in the capital. The Abu Dhabi Securities Exchange General Index closed down 0.2 per cent at 4,543.4.
jeverington@thenational.ae
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