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Saudi Arabia Makes Entry Into MSCI Watchlist For Emerging Markets Index

Saudi Arabia has reached a major milestone as an emerging market with leading index provider MSCI Inc announcing that it is potentially considering including Saudi Arabian stocks in the MSCI Emerging Markets Index in 2018.

Saudi Arabia which is said to have the largest equities market in the Middle East has been put on the watch list by MSCI for a potential upgrade into the index based on a recent announcement from the company.

Assets worth nearly $1.5 trillion are benchmarked by fund managers worldwide to the MSCI Emerging Markets index family.

Although integration of the Saudi stocks into the highly-regarded MSCI Emerging Markets Index is not slated to take place until next year, financial experts say the news of its possible inclusion will boost foreign investors' interest into the country’s Qualified Foreign Investor (QFI) program.

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The possible promotion to the MSCI index can be attributed to a lengthy reforms program carried out by Saudi regulators and its stock exchange to make the economy more open and stable. Measures introduced include increased access to foreign investors and rolling out of T+2 settlement.

MSCI said that it will be gathering feedback from international institutional investors in the coming months regarding their experience of accessing the Saudi market as well as the impact of the newly-introduced measures.

According to a report by banking major HSBC Holdings Plc, if Saudi Arabia gets fully included into the MSCI Index next year, then up to a maximum of $9 billion could enter the market. The country’s authorities are hoping that the wait for the formal inclusion will not be long.

In a statement Mohamed El-Kuaiz, vice-chairman Saudi Arabia's Capital Markets Authority said

Given the pace and the magnitude of capital-markets reforms that have been made in Saudi Arabia and the commitment that has indicated, the duration that we will be on the watch list will hopefully be shorter

Analysts have forecast that Saudi Arabia’s inclusion into the index is likely to trigger significant interest into its equity market and also into other markets in the Middle East and the North African region.

The interest in these regions have grown in recent times, particularly in light of the upcoming sale of Saudi Aramco, the largest oil-export company in the world. Equities strategist at EFG-Hermes in Dubai Mohamad Al Hajj stated that the promotion would place Saudi Arabia among the top 10 emerging markets.


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