Tadawul might touch 9100-9300 levels in Q2 on MSCI inclusion: AlJazira Cap

Tadawul All Share Index (TASI) is expected to be traded at premium due to coming actual inclusion into the MSCI Emerging Markets Index and it might reach 9100-9300 points in Q2 2019 based on a forward price-to-earnings (PE) expansion, AlJazira Capital noted in a report on Sunday.

Also read: Tadawul’s MSCI inclusion could boost TASI above 9,000: Riyad Capital

The recent recovery in TASI post a short lived decline asserts the fact that Tadawul has an upward road ahead till the actual inclusion concludes, at least up to the end of 2019, following which the upsurge may not be sustainable and the next movement would be driven by rational fundamentals, the brokerage added in the report.

With the announcement of TASI upgradation to MSCI Emerging markets, the Saudi Arabia index is witnessing an upright run.

“However, with a closer look, it can be deduced that the upward movement is skewed towards the top weighted companies. Even the increase in weights of the top 5 companies in the index also underlines the ‘Top Heavy’ theory,” the report added.

AlJazira Capital said though TASI witnessed a considerable growth in QFI ownership since the upgradation announcement; it still provides much scope for further infusion as compared to its other emerging market peers.

Moreover, the report added, TASI’s continued outperformance over MSCI Emerging Market Index has made it a real attractive investment avenue.

The year-to-date (YTD) equity inflows has substantiated this fact, however, it still has room for further inflows as its peers with relatively higher weight in the index have enjoyed much higher equity inflows during the period, the report further added.