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Mon 18 Mar 2019 02:06 PM

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Foreigners spend record on Saudi shares as Tadawul upgrade begins

First phase of Saudi Stock Exchange's inclusion into the FTSE Russell and S&P Dow Jones Indices starts

Foreigners spend record on Saudi shares as Tadawul upgrade begins
A Saudi investor monitors the stock exchange at the Saudi Stock Exchange, or Tadawul in the capital Riyadh. (FAYEZ NURELDINE/AFP/Getty Images)

Foreign investors increased purchases of Saudi equities last week to the highest value on record as they positioned for the kingdom’s inclusion in major benchmarks.

Foreigners were net buyers of about SR1.6 billion ($427 million) of stocks in the five days through March 14, more than any other week since the data were first disclosed in 2015.

The inflows picked up as FTSE Russell begins to include the country in its emerging-market category on Monday, attracting fund managers that follow the indexes passively.

Qualified foreign institutional investors, who were first allowed to directly access the Saudi bourse in 2015, were the leading category of purchasers.

They’ve been net buyers almost every week this year, reversing a trend that started in October when they sold heavily amid increased volatility following the murder of Saudi journalist Jamal Khashoggi.

Saudi Arabia’s full inclusion in FTSE’s emerging-market category will be phased in over five tranches and completed by March 2020, while an upgrade by index compiler MSCI Inc. will happen in two stages later this year.

Khalid Al Hussan, CEO of Tadawul, said: "The inclusion into these pre-eminent indices is a testament to growing investor confidence in the Saudi market and reflects the successful implementation of far-ranging capital market reforms.

"We look forward to welcoming the constituent participants who will invest in these indices, and to building a long term relationship as the Saudi capital market continues to consolidate its leading position in the Middle East and the broader region as a whole."

Waqas Samad, CEO of FTSE Russell, said: "Saudi Arabia's promotion to emerging market status within FTSE Russell's global equity benchmarks is a significant achievement.

"The CMA and Tadawul have long been committed to improving Saudi Arabia's capital markets infrastructure and today marks a culmination of their efforts to meet the rigorous requirements for inclusion."

On completion of the first phase, Alex Matturri, CEO at S&P Dow Jones Indices, said: "Saudi Arabia's recent move in our country classification to emerging market from stand-alone is a result of an ongoing consultation with market participants. It reflects the strong consensus among members of the global investment community and recent positive market structure reforms that support foreign investment in the country. S&P Dow Jones Indices looks forward to continuing to provide innovative index-based solutions in the Middle East region."

Capital market reforms and enhancements implemented over the past two years have paved the way for index inclusion and reflect Tadawul's continued commitment to enhance the effectiveness of the Saudi capital market and foster an attractive investment environment for local and international investors.

Investment inflows resulting from index inclusion are expected to further enhance liquidity and trading in the Saudi market, which is already among the most liquid of emerging markets worldwide.

Tadawul said it is determined to become an active player in global capital markets as a source of capital and an investment destination.

* With Bloomberg

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