‘Dumb-money’ for Saudi stocks won’t be enough to aid market

‘Dumb-money’ for Saudi stocks won’t be enough to aid market:

While billions of dollars will flow into Saudi Arabia with its inclusion in MSCI Inc’s emerging-market benchmark in June, don’t count on the passive money to revive the market’s fortunes, says Eaton Vance Corp.

Government-related funds, which appeared to have propped up Saudi equities following the murder of columnist Jamal Khashoggi in October, will probably become sellers next year to investors tracking the MSCI index – in classic buy-low, sell-high style, according to the Boston-based money manager. 

“We would expect a dumb-money passive bid to purchase Saudi equities, regardless of their valuation, which, I might add, is not particularly cheap,” said Marshall Stocker, a Boston-based portfolio manager at Eaton Vance, which oversees about $439bn. “I do not think the Saudi stock market will trade up upon inclusion. Instead, the Saudi state may prove ingenious in selling their holdings to index funds.”