Foreign investors slow Saudi shares uptake ahead of bourse upgrade

Foreign investors were net buyers of about $118m in Saudi shares last week, a drop of 47% from the previous five days
Foreign investors slow Saudi shares uptake ahead of bourse upgrade
A Saudi investor monitors the stock exchange at the Saudi Stock Exchange. (FAYEZ NURELDINE/AFP/Getty Images)
By Bloomberg
Mon 25 Feb 2019 02:14 PM

Foreign investors are slowing the pace at which they are buying Saudi stocks, even as the kingdom’s inclusion in major emerging-markets benchmarks lies just around the corner.

Foreign investors were net buyers of about 443 million riyals ($118 million) in Saudi shares last week, a drop of 47 percent from the previous five days and the second straight week of slower purchases.

Analysts and traders are closely monitoring the appetite for the country’s shares as they are about to begin to be included in emerging-market benchmarks compiled by FTSE Russell and MSCI Inc next month and in June, respectively.

As investors anticipate purchases before the upgrades, some emerging-markets money managers view Saudi stock valuations as too high compared with the category they’re about to join.
In January, the Tadawul All Share Index reached the most expensive level relative to the MSCI Emerging Markets Index since 2015, when measured using estimated price-to-earnings in the next 12 months.

Despite the slower pace of purchases and some unappealing valuations, foreigners have been buyers for eight straight weeks in 2019, marking a reversal of a trend late last year when there was a sell-off triggered by the murder of Saudi journalist Jamal Khashoggi. On the other hand, if you measure flows since the end of the week that he went missing, foreigners remain net sellers.

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