RIYADH: The largest Arab economy’s classification as an emerging market is a key step toward the kingdom’s goal of attracting billions in additional stock investor inflows.
FTSE Russell also announced that Kuwait’s stock market would enter its emerging market index in two equal stages in September and December this year, and 10 Kuwaiti stocks currently look likely to join the benchmark.
Saudi Arabia joins a category that already includes China, Russia and India. The kingdom will have a 2.7 per cent weighting in the compiler’s main emerging market stock benchmark, FTSE said.
“Saudi Arabia is to be congratulated on the pace of the recent market reforms,” said Mark Makepeace, FTSE Russell’s chief executive officer.
FTSE’s decision is one of two watershed index announcements the kingdom’s regulators – and the markets – are awaiting. MSCI Inc is expected to announce its decision in June. Many equity funds around the world benchmark themselves against the index, and they will need to buy Saudi stocks when the change takes effect. With a capitalisation of about $500 billion, Saudi Arabia is the Arab world’s largest equity market.
The decision is a boost to reforms launched by Crown Prince Mohammed bin Salman, who wants foreign investment to create jobs and diversify the economy, which has been hit hard by low oil prices, beyond energy exports.
“Saudi Arabia’s inclusion in the FTSE benchmark is the largest event in the emerging markets since 2001, and an important development for global investors,” Makepeace said.
To prevent Saudi Arabia’s large size from destabilising other markets as funds shift money to Riyadh, the kingdom will enter the index in several stages starting in March 2019 and ending in December 2019, FTSE said.
The kingdom is projected to have a weight of 2.7 per cent in the index, which could rise to about 4.6 per cent because of the government’s proposed public offer of five per cent of the shares of state oil giant Saudi Aramco.
