Saudi bourse FTSE upgrade may attract $7bn of inflows

20 March, 2019 12:00 AM printer

RIYADH: Saudi Arabia's benchmark Tadawul exchange, the biggest in the Arab World, could attract as much as $7 billion in passive foreign inflows following its inclusion in FTSE Russell’s emerging market index, as the bourse also considers rolling out new products, the chief executive of the index compiler said.

Tadawul will have a 2.9 per cent weighting in the FTSE Emerging All Cap Index when all phases are complete by March next year. Passive investors follow indexes unlike active investors who pick stocks, report agencies.

“We feel this inclusion into our emerging market index is reflective of the developments that have taken place in the local market over time,” said FTSE Russell's Waqas Samad told The National on Monday. “These developments have really been spurred by the desire of the market authorities in Saudi Arabia to open the market to foreign investors as part of the overall be more in line with global standards.”

Saudi Arabia’s stock exchange, with a market capitalisation exceeding $540bn, undertook reforms to earn inclusion in the FTSE Index, as well as that of S&P Dow Jones Indices, another index compiler. MSCI’s emerging market index, a widely tracked gauge by global investors, is set to start the inclusion process of Saudi Arabia in two phases from May, a move that will buoy foreign inflows every further.

The stock market, the best performing Arabian Gulf market so far this year with around a 10.5 per cent increase, plans to carry out more reforms to help attract foreign investors, who will help improve liquidity and trading in the market, Tadawul said in a statement on Monday.

“The inclusion into these pre-eminent indices is a testament to growing investor confidence in the Saudi market and reflects the successful implementation of far-ranging capital market reforms,” Khalid Al Hussan, the chief executive of Tadawul, said in the statement. “We look forward to welcoming the constituent participants who will invest in these indices, and to building a long term relationship.”