MSCI Says Saudi Stock Market Needs Easier Access for Foreigners
June 14 2016 - 8:50PM
Dow Jones News
DUBAI—Benchmark provider MSCI Inc. on Tuesday said Saudi Arabia
needs to implement reforms that give foreign investors easier
access to its stock market, which would boost its chances of
winning the emerging-market tag.
The kingdom opened its $404 billion stock market to
international investors in June 2015, seeking to attract more
foreign capital in its push to diversify away from its dependence
on oil revenue. But foreign investments in the Middle East's
biggest market have been slower than most expected due to some
restrictive rules.
Last month, the Saudi market regulator announced it would allow
foreign investors to own larger stakes in listed companies, as well
as amending other rules, including changes to the settlement cycle
of listed securities and the introduction of a proper delivery
versus payment mechanism.
These changes, which are expected to be effective by the middle
of 2017, will bring Saudi Arabia closer to emerging-market
accessibility standards, MSCI said.
An emerging-market classification by compilers such as MSCI is
highly coveted, as it would help attract millions in additional
inflows from funds that use such benchmarks. The MSCI Emerging
Markets Index is tracked by money managers with some $1.5 trillion
of assets.
Credit Suisse Group AG last month said the reforms announced by
the Saudi regulator in May will after implementation strongly
increase the likelihood of the country being classified as an
emerging market by MSCI. But it expects the country to be included
in the review process only in June 2017.
"We believe that Saudi Arabia is well placed for a positive
outcome, though a decision is only forthcoming after 12 months of
deliberation while the implementation occurs after another 12
months. Therefore, the earliest that we believe Saudi Arabia can
enter the EM index is June 2019," Fahd Iqbal, the head of Middle
East research at Credit Suisse, told clients in a note.
MSCI usually seeks feedback from investors during the review
period on the effectiveness of rules that markets implement,
especially those related to accessibility.
The index compiler on Tuesday said it would continue to monitor
the evolution of the Saudi market opening to international
institutional investors.
Saudi Arabia was one of the last major markets globally to
restrict international investments before it opened its doors to
foreigners last year. The Saudi Stock Exchange's benchmark Tadawul
All Share Index closed 0.6% higher at 6626.58 Tuesday ahead of the
MSCI announcement but is down about 4% this year.
The kingdom and many of its oil-exporting Persian Gulf neighbors
are adopting measures to reshape their economies in an era of cheap
energy prices. The kingdom last week unveiled details of plans to
more than triple its non-oil revenue by 2020 while cutting state
handouts and subsidies as part of an initiative called the National
Transformation Program.
Write to Nikhil Lohade at Nikhil.Lohade@wsj.com
(END) Dow Jones Newswires
June 14, 2016 21:35 ET (01:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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