QFI ownership on Tadawul to rise on MSCI inclusion, Aramco IPO

Qualified foreign institutional investors’ (QFIs) ownership on the Saudi Stock Exchange (Tadawul) could rise going forward, boosted by improved investor sentiment as Saudi equities remain on the watch-list for potential MSCI EM inclusion, Al Rajhi Capital said in a report.

The upcoming initial public offering (IPO) of Saudi Aramco will also trigger higher institutional investor interest for the broader Saudi stock market, the brokerage added.

QFI ownership, which has been increasing steadily since August 2015, gained momentum from February 2017 mainly due to switch from swaps. In July, however, both QFI and swap ownerships declined before climbing again in August.

“In-line with our view, QFI ownership has resumed the uptrend, increasing to 0.42 percent in August versus 0.39 percent in July. The swap ownership was also flat, standing at 0.59 percent in August versus 0.58 percent in July,” the report said.

Saudi individuals’ ownership, meanwhile, stabilized over the past two months, snapping its downward trend since August 2015. Over the past two years, Saudi individuals’ ownership has declined 530 bps to 27.3 percent, Al Rajhi Capital noted.

“If the Saudi individuals’ market ownership stabilizes, or even better – rises from the current levels, then it is positive for the market traded value as Individuals have higher portfolio churn,” the report said.

The volatility in REITs’ traded value returned in August, after two months of stability. Most of the activity was between August 16 and August 27.

The sectors that attracted maximum interest in the past three months were banks, consumer sector and yield plays, and media.

“Increased dividends from major banks post Q2 results may have attracted investor interest in the banking sector,” the brokerage noted.

On the other hand, materials (petrochemicals and cement), capital goods, transport, energy and pharmaceutical were among the sectors that drew low interest.