Al Rajhi Capital rules out changes in MSCI Index semi-annual review

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Al Rajhi Capital said the MSCI Index constituents will unlikely be tweaked in the upcoming semi-annual review in November.

In a report, the brokerage indicated that the market capitalization for Saudi Kayan, Advanced and Zain KSA has surpassed the segment’s maximum threshold. However, it remains above the lower threshold, hence satisfying the universal equity cut-off criteria.

"On the other hand, screening for potential inclusion candidates, we conclude that based on their respective market caps, Riyadh Cables (SAR 15.4 billion) and Aldrees (SAR 14.1 billion) reasonably satisfy all criteria of the investability screening and exceed the reference point. However, both of them fail to meet the upper threshold (SAR 18.3 billion). Consequently, we rule out the possibility of their inclusion in the Standard index," it added.

Since all other requirements are adequately being satisfied by them there is some probability for the upgrade/inclusion in the next review given that these stocks rally between 18-30%, the brokerage noted.

Assuming the proforma weight of Saudi Arabia remains unchanged at 3.78% (rounded up) in the MSCI Emerging Markets Index, Al Rajhi Capital estimates no major inflows/outflows as there will possibly be no changes to the index constituents.