Index inclusion promises Saudi a pre-Aramco bump | ZAWYA MENA Edition

Index inclusion promises Saudi a pre-Aramco bump | ZAWYA MENA Edition:

"Saudi Arabia’s integration with global markets doesn’t depend entirely on the initial public offering of Saudi Aramco, its national oil champion. FTSE Russell is adding the kingdom to its global and emerging-markets indexes. MSCI is likely to follow suit, which could steer billions in index funds to the Riyadh exchange.

The big index companies have been dancing with the Saudis for years but have held off from including the country’s stocks in their benchmarks because of limited market access and burdensome rules. What tipped the balance this time were measures to simplify the quota system used to give foreign investors access and to align settlement procedures with global norms.

Although the quotas have been in place for three years, most international investors have little exposure to Saudi stocks. By itself, the FTSE Russell decision is unlikely to change that picture dramatically. Based on the funds that track the relevant indexes, inclusion could generate some $5 billion of inflows, or 1 percent of the $500 billion market cap of the Tadawul, the only Saudi bourse."



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