JEDDAH — MSCI Inc. — a leading provider of investment decision support tools to over 5,000 clients worldwide, ranging from large pension plans to boutique hedge funds — said it could rank Saudi Arabia as an emerging market alongside countries such as Brazil and China, if the Kingdom moves ahead with longstanding plans to open up its stock market to foreign investors.
That could vault Saudi Arabia above smaller regional markets such as the UAE and Qatar, which MSCI continues to rate as "frontier" markets in its global market indexes. Inclusion in the MSCI emerging markets index tends to lead to a big inflow of investment from global stock market funds which track the index.
In its yearly market clarification review, released late Wednesday, MSCI noted that investors from outside the Gulf Cooperation Council, or GCC, region currently have only indirect access to the Saudi equity market. Foreigners can access the Saudi market using swaps "which for institutional investors may cause compliance issues," MSCI said.
"The introduction of a new scheme allowing direct access for non GCC based investors to the Saudi equity market may result in MSCI considering the inclusion of Saudi Arabia in Frontier Markets or Emerging Markets, depending on the level of market accessibility," MSCI said in a statement on its website.
With a market capitalization of about $360bn, Saudi Arabia accounts for almost half of the Gulf region’s total value for listed companies, according to Zawya.com data.
The benchmark Tadawul Index has added almost 7 percent in value this year.
The MSCI said that the market capitalization of all the stocks in its emerging market index amounts to $3.2 trillion.
There has been speculation that a decision could be taken to open the Saudi market to foreign investment this year.
Gulf bourses ended mixed in a muted session yesterday that saw investors little moved by index compiler MSCI’s decision to keep frontier market status for the UAE and Qatar, while Egypt’s bourse resumed its decline on political woes. This was the fourth time Qatar and UAE failed to obtain emerging market status, an upgrade which could attract renewed interest from long-term investors and global fund managers.
Dubai’s index slipped 0.4 percent, trading within its tight range of 85 points over the past six weeks.
There was little hope of an upgrade to emerging market status and few bets placed ahead of the announcement. Bellwether Emaar Properties dropped 1.4 percent and Dubai Financial Market.
Abu Dhabi’s benchmark climbed 0.8 percent, with telecom operator Etisalat the main support. Shares in the firm, available for trading only to UAE nationals, gained 2.4 percent. Elsewhere, Egypt’s benchmark index resumed its decline after a one-day pause, dropping 1.9 percent on political anxieties after the result announcement of Egypt’s presidential election was postponed over allegations of fraud.
In Kuwait, the benchmark ended 0.3 percent lower, falling for the last seven sessions in eight as the country suffers from political crisis.
Elsewhere in the Gulf, Oman’s index slipped 0.4 percent to 5,666 points, while Bahrain’s measure eased 0.09 percent to 1,128 points. — SG/Agencies