Tadawul chairwoman congratulates Saudi stock exchange for 'yet another success'

Saudi Aramco Clears Another IPO Hurdle | OilPrice.com

Saudi Arabia added to the MSCI EM index

Finally, social reform continues unabated leading to new investment opportunities across the economy.

Several years ago, MSCI demoted Argentina to frontier markets status, but regime changes and efforts to improve local financial markets positioned the country for reentry to the MSCI Emerging Markets Index.

Bassel Khatoun, managing director, Frontier and MENA, Franklin Templeton Emerging Markets Equity, said: "We expect that foreign ownership levels will substantially increase, which at approximately 2%, significantly lag those of the UAE and Qatar (14% and 9% respectively)".

"It is very good to have more opportunities for investors to invest", said Akira Takei, a fund manager at Asset Management One in Tokyo, which oversees around US$500 billion.

Khalid al-Hussan, CEO of Tadawul, told a news conference in Riyadh that MSCI's move had created market capacity to absorb liquidity and would be the main element in feeding new IPOs.

"Saudi Arabia is in the early stages of an exciting transformation", he said.

Uruguay vs. Saudi Arabia live stream
While Saudi Arabia did try hard to find an equalizer, their efforts went in vain thanks to strong defending from the Uruguay . The defeat means both they and Egypt are eliminated from the tournament after successive defeats.

MSCI will decide whether to reclassify Saudi Arabia and its US$ 526 billion bourse to "emerging" from "standalone" status.

Although any fund inflow would only be beneficial to the kingdom's stock market, the $10 billion figure in passively managed funds is mere 2% of Tadawul's $523 billion market cap. That changed during the past year as Crown Prince Mohammed Bin Salman carried out a global charm offensive. The timing of the initial public offering is uncertain, although next year is considered more likely.

There has been concern about whether the Saudi exchange Tadawul will be able to handle the addition of Aramco: petrochemical stocks already represent a quarter of Tadawul's equity index and with Aramco's shares added, the share of the oil and petrochemicals industry would become disproportionately large on the exchange, dampening investor appetite.

MSCI said its decision came after the kingdom's equity market - the largest in the GCC region with a market capitalisation of SAR1.95 trillion (around $520bn)- implemented a number of regulatory and operational enhancements.

Analysts at Bank of America Merrill Lynch said another effect of Saudi's inclusion would likely be "increased market sophistication". According to a survey of Bank of America investors cited by Bloomberg, 56% thought that Argentina should be promoted, but only 38% believed that this could happen. At least three different Wall Street shops have assigned Argentina's reclassification chances between 60 to 70 percent. The index provider's blessing can launch billions of dollars from index-tracking funds into markets around the world, especially developing economies. Accordingly, the share of South Korean stocks can decrease further. Meanwhile Argentina's markets have been roiled in recent weeks after currency volatility forced Buenos Aires to ramp up interest rates to 40% and seek a US$ 50 billion lifeline from the International Monetary Fund. Yet a half-measure is also possible: MSCI could upgrade only the American depositary receipts of Argentine companies.

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