Saudi Arabia to attract $1.58bn in investments next month in phased FTSE upgrade

Saudi equities expected to attract as much as $7bn in total investments once all phased in

Stock price information inside the Saudi Stock Exchange, the region's biggest bourse. Bloomberg

Saudi Arabia's Tadawul exchange, the Arab world's biggest bourse, is set to attract about $1.58 billion (Dh5.8bn) in passive foreign inflows in the third phase of its inclusion in FTSE Russell's emerging market index. The Tadawul's inclusion is being done in five phases.

Saudi Arabia will start receiving inflows into its equities from June 20, when the third upgrade phase will be implemented, EFG Hermes, Egypt's top investment bank by market capitalisation, said yesterday.

First Abu Dhabi Bank, the largest bank by assets in the UAE, will be the second biggest Mena trade, attracting about $225 million from passive institutional investors, EFG Hermes added.

The kingdom's equities, which will have a 2.9 per cent weightage in the FTSE Emerging All Cap Index once all the inclusion phases in the benchmark gauge are complete by March 2020, could attract as much as $7bn, FTSE Russell's chief executive, Waqas Samad, told The National in March.

Saudi Arabia's stock exchange undertook reforms to earn the inclusion to the FTSE Index, as well as the S&P Dow Jones Indices.

The kingdom’s bourse won the landmark inclusion in the MSCI Emerging Market benchmark in June last year.

This inclusion paves the way for an estimated $40bn of additional inflows to the kingdom’s half-a-trillion-dollar stock market.

The phased inclusion of Saudi Arabia 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, MSCI said.

MSCI’s emerging market index, along with FTSE and S&P Dow Jones Inices, are widely tracked gauges by global investors that manage trillions of dollars in investments. MSCI will also announce its decision on potentially upgrading Kuwait to its emerging market classification next month, it said last week.

Kuwait’s bourse and Saudi Tadawul are the best-performing exchanges in the region since the beginning of this year.

Kuwait’s benchmark equities index has risen close to 10 per cent while Saudi Tadawul All share index is up 9 per cent for the period.