Saudi MSCI’s inclusion doesn’t mean cash migration to kingdom

June 23, 2018 12:53 pm


Saudi Arabia’s efforts to modernize its stock market and attract billions in investments were recognized by MSCI, which announced on Wednesday the addition of the kingdom to its group of emerging markets.

Bloomberg reported that the index compiler, which has more than $1.9 trillion in assets benchmarked to its group of emerging markets indexes, will reclassify Saudi Arabia with implementation of its indexes starting in June 2019.

Read: Saudi Tadawul suddenly buyers’ market after MSCI nod

To find out more about the significance of this, AMEinfo reached out to Jameel Ahmad, Global Head of Currency Strategy & Market Research, FXTM,who commented:

‘There is no reason to suggest that Saudi Arabia being included into the MSCI Index will lead to capital outflows from the UAE, or elsewhere in the GCC region. The investors who monitor the MSCI Index are very much international investors, and would spread their portfolio across the globe in most cases. The inclusion of Saudi Arabia into the MSCI Index on its own is not actually that much of a significance to the GCC market, it is the improved perception that this could have on international investors when you consider how inter-connected the global markets are in the current age.”

Read: Does Index Inclusion in FTSE, MSCI answer Kuwait, Saudi liquidity needs?

As to how this inclusion might impact Aramco’s IPO on Tadawul, Ahmad added:

“I am unsure what impact the news will have on the potential Aramco IPO, however it will most likely provide positive encouragement to the Tadawul stock exchange. Inclusion into the MSCI Index holds the potential to drive high levels of foreign investment into the stock market. It can also be articulated as a vote of confidence for the Saudi Arabian economy, following a list of different measures that the authorities have taken in recent times to liberalize the market.”

Read: MSCI welcomes Saudi reforms, to review emerging market inclusion

“It does represent a very important milestone for Saudi Arabia, and can be articulated as a reflection of investor confidence in the economy,” Ahmad concluded.

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Jameel Ahmad is an expert in financial market developments, and specialises in global currencies, commodities and emerging markets. FXTM’s VP of Corporate Development and  
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