Jadwa Investment says inclusion in FTSE and MSCI Emerging Markets to bring at least $15bn in inflows by end-2019
The upgrade of Saudi Stock Exchange (Tadawul) by MSCI to Emerging Markets status as well as improved investor sentiment related to higher oil prices led to a 7 percent rise in value for the bourse in the second quarter of 2018.
Jadwa Investment said in a research note that the Tadawul All Share Index's (TASI) year-to-date gains currently stand at around 17 percent, making it the best performing equity market when compared to major international and regional indices.
"What is more impressive is that this performance has come at a time when emerging market equities have seen some pullback, with global fund investors decreasing their emerging market bond and equity allocations in recent months," Jadwa said.
Looking ahead, Jadwa said it expects the combination of both FTSE Emerging Market (EM) and MSCI EM inclusion to bring in a minimum of $15 billion in passive inflows by the end of 2019.
It added that it also expects active investors benchmarked to MSCI EM to start entering the market prior to actual inclusion, which is expected to drive TASI performance even higher.
Jadwa said it views a rise of at least 20 percent between now and early 2019 as "totally plausible", pushing TASI to around 10,000 points, compared to circa 8,400 points currently.
Buying by qualified foreign investors (QFIs) totalled SR4.4 billion in Q2, taking the total net QFI inflows to SR12.3 billion since the start of the year, the research note said.
Index compiler S&P Dow Jones Indices said on Wednesday that it will change the status of Saudi Arabia’s bourse from a stand-alone market to an emerging market, following similar moves from MSCI and FTSE.
In a statement, S&P DJI said it will add Saudi stocks with a 50 percent weighting on its global index in March 2019.For all the latest market news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.