FTSE, MSCI inclusion may drive TASI past 9400 by year-end

Saudi Arabia’s benchmark Tadawul All Share Index (TASI) is expected to peak past 9400 points by year-end as majority of passive flows will be witnessed between March and August following its inclusion in the FTSE and MSCI emerging market indices, brokerage firm Riyad Capital said in a new report on Sunday.

“We can reasonably expect between SAR 90 billion and SAR 100 billion flows in the market, while traded value can rise by $100 million per day (+14 percent),” the it noted.

The first of five phases of TASI inclusion in FTSE Russell Index has commenced and will be followed by the beginning of two-phased MSCI index inclusion on May 29.

Foreign inflows have commenced at the Tadawul with a total of SAR 7.9 billion coming in year-to-date (YTD) until March 7, the report said, adding TASI has risen by eight percent YTD and just 14 percent in the last 12 months, versus much steeper rise in peers before inclusion.

An estimated $1.8 trillion and $200 billion are benchmarked to the MSCI and FTSE emerging market Index, respectively, Riyad Capital said.

Meanwhile, negotiated deals at the Tadawul rose by 82 percent year-on-year in the last three months, reaching SAR 1.78 billion compared to SAR 982 million.

“With expectations of rising foreign flows, we expect a further increase this year. GREs may also view this opportunity as a good time for profit booking,” the brokerage noted.

Additionally, foreign portfolio investors have been buyers for most of since January 2019 and is expected to continue in the coming months, it added.

Earlier this month, AlJazira Capital said that TASI is expected to be traded at premium due to its inclusion into the MSCI Emerging Markets Index and is likely to reach 9100-9300 points in Q2 2019 based on a forward price-to-earnings (PE) expansion.

Saudi Arabia will be the largest Middle East market in the FTSE Emerging Index with an overall weighting of 2.7 percent, while in the MSCI Saudi Arabia Index will have a weighting of approximately 2.6 percent in the Emerging Markets Index, with 32 securities.

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