Saudi Arabia to get MSCI emerging market status, says EFG Hermes

Saudi Stock Exchange (Tadawul) has a 100 percent chance of being included in the MSCI’s emerging market (EM) index next month, EFG Hermes said in a new report on Sunday.

“We see no reason why MSCI would not upgrade Saudi Arabia to emerging markets status this June,” the investment bank said.

MSCI is expected to announce a decision on whether to upgrade Saudi stocks to EM status in June.

Index compiler FTSE Russell moved Tadawul to EM status after it implemented a series of capital market reforms in line with the Vision 2030 strategy.

According to EFG Hermes, the earlier FTSE decision means MSCI will be able to observe two tranches of FTSE Russell implementation, “giving them comfort that any hiccups observed during those trades would be addressed by the relevant Saudi authorities".

“The MSCI May 2018 trade is around $36 billion (two-way flows), meaning that a Saudi upgrade is manageable in two tranches,” EFG Hermes noted.

Earlier this month, S&P Dow Jones Indices (S&P DJI) said it has begun consulting investors for a potential upgrade for Saudi Arabia to emerging market status.