Gulf MSCI upgrades could push Saudi bourse to open up

  • Share via facebook
  • Tweet this
  • Bookmark and Share

Equities index MSCI’s decision to upgrade the UAE and Qatar to emerging market status could pressure Saudi Arabia to accelerate foreign ownership plans for its own bourse, fund managers said.

MSCI, whose indexes are tracked by investors with $7 trillion in assets, on Tuesday promoted the two Gulf countries from frontier market status at the fifth time of asking after the UAE introduced buyer cash-compensation procedure and Qatar modified its foreign ownership rules.

The upgrades could lead to more than $800m of new investment flowing into both markets, according to HSBC, with stock markets in both countries rallied following the news.

“It’s a gradual stage process, but with Qatar and the UAE both being added in this year, I imagine that this would push the Saudis in the right direction,” said Amer Kahn, fund manager at Dubai-based investment bank Shuaa Capital Asset Management. “When I say the right direction, it’s a direction they’re already headed in.”

Saudi Arabia’s Capital Markets Authority (CMA) said last month that it was in the process of finalising a long-delayed regulatory framework that would allow foreigners to directly own stocks in the kingdom.

To achieve emerging market status in MSCI’s index bourses are normally required to permit foreign ownership in securities of about 25 percent.  “We hear that the CMA is very interested in making Saudi part of the MSCI emerging markets as well,” Kahn added.

Saudi Arabia’s Tadawul market currently lists about $405bn shares.

MSCI delisted Saudi Arabian from its equities index in 2009 following a dispute over how it licences information from the exchange. It was reintroduced to MSCI in 2012.

In an emailed statement, Emad Mostaque, a strategist at Noah Capital Markets EMEA added that MSCI’s move “puts additional pressure on Saudi Arabia to accelerate its qualified investor program and we now believe this is likely over summer”.

Any move would likely put foreign ownership restrictions on companies located in the Islamic holy cities of Makkah and Madinah, he said.

Related:
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

All comments are subject to approval before appearing

Further reading

Features & Analysis
Does the Saudi IPO signal the end of the age of oil?

Does the Saudi IPO signal the end of the age of oil?

Saudis may want to capitalise on an asset that’s only going to...

China paves way for market-based IPO system

China paves way for market-based IPO system

A new law would let companies, not regulators, determine when...

Trading from the frontline in Palestine

Trading from the frontline in Palestine

Palestine’s economy has been crippled by the war on Gaza but...

Most Discussed
  • 7
    Deported expats will face GCC-wide ban

    Thanks for using a British passport in your picture, is it just British expats that are deported? No, it's not in fact we are in the minority. Using a... more

    Sunday, 7 February 2016 1:57 PM - matt williams
  • 1
    UAE to build $3bn alumina refinery by end-2017

    What is being done for the recycling of Red Mud? I have contacted EGA several times requesting information on the recycling of the Red Mud. As of today... more

    Sunday, 7 February 2016 8:46 AM - Gary McNeish
  • 1
    Emirates beats rival Etihad in UAE battle of the brands

    Oh my! a survey of such magnitude - 1000 people in UAE! And where were these 1000 people from? Dubai? What nonsense as usual. If you ask most people in... more

    Sunday, 7 February 2016 1:58 PM - Steven
sponsoredTracking