Tadawul’s MSCI inclusion positive for Saudi asset managers: Moody’s

The Saudi Stock Exchange’s (Tadawul) inclusion in MSCI emerging markets index will deepen the liquidity and trading volume of the stocks in the index and will likely attract a growing number of foreign investors, Moody’s noted in its report on Tuesday.

The inclusion is a credit positive for Saudi asset managers such as NCB Capital and Jadwa Asset Management and managers involved in cross-border products, Moody’s added.

Also see: Tadawul’s MSCI inclusion will 'deepen' regional equity markets

“We expect broad demand will be credit positive for the asset managers because it will allow them to offer new investment products, which will add diversification benefits,” the report maintained.

In addition, Moody’s said, asset managers that build strategies around the Saudi market, such as Invesco, which launched its first Saudi Arabia exchange-traded fund on the London Stock Exchange in June 2018, will likely increase their assets under management.

Besides, international asset owners managing passive investment strategies in the emerging market sector will broaden their investment universe, diversifying assets, Moody’s noted in the report.

Saudi equities' inclusion in the MSCI EM Index will facilitate investors’ accessibility to the local stock market, Moody’s said, adding that it expects more international institutional investor participation in the onshore, largely retail-driven market.

Moody’s said the inclusion of Saudi Arabian equities in the MSCI EM Index will link the Saudi equity market to the most dominant trend in asset management: the increasing adoption of low-cost passive index funds.

“We estimate that about $30-$40 billion will flow into the Saudi stock market because asset managers and institutional investors following this benchmark will rebalance their portfolios to minimize their tracking error,” it maintained.