Al-Rajhi Bank, Maaden boost Saudi stocks

International index compiler FTSE is due to decide next month whether to upgrade Saudi Arabia to secondary emerging market status, which could bring billion of dollars of fresh passive and active fund inflows. (Reuters)
Updated 23 August 2017
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Al-Rajhi Bank, Maaden boost Saudi stocks

DUBAI: The Tadawul All Share Index (TASI) rose on Tuesday on the back of gains by Al-Rajhi Bank and mining firm Maaden, while Dubai also outperformed most Gulf bourses although trading was thin.
The Tadawul index climbed 0.4 percent with Al-Rajhi up 2.2 percent to SR65.80 ($17.55), bringing its gains over the last five days to 4.9 percent. Of 14 analysts covering the stock, seven rate it a “buy” or “strong buy” and six rate it a “hold,” according to Thomson Reuters data; their median target price is SR70.90.
Maaden rose 1.8 percent after international base metal prices surged to multi-year highs overnight.
Maather REIT Fund jumped its 10 percent daily limit from its initial public offer (IPO) price to SR11 upon listing in Riyadh to become Saudi Arabia’s fifth listed REIT (real estate investment trust).
Its subscription in the IPO had been covered 15.2 times and analysts at NCB Capital had estimated that based on its subscription price of SR10 per share, its dividend yield for 2017 would be 7.2 percent.
Three other REITs were among the 10 most actively traded stocks and swung widely, although they closed lower. Al-Jazira Mawten REIT fell 2.2 percent.
International index compiler FTSE is due to decide toward the end of September whether to upgrade Saudi Arabia and Kuwait to secondary emerging market status, which could bring them billion of dollars of fresh passive and active fund inflows.
Some investors have begun positioning for the decisions, and Arqaam Capital said in a report on Tuesday that positive decisions appeared likely in both cases, although actual inclusion would probably only occur in two phases in September 2018 and March 2019.
However, Tarek Fadlallah, chief executive of Nomura Asset Management Middle East, wrote in a report that macroeconomic indicators suggested a subdued outlook for Gulf Cooperation Council (GCC) countries, and that while profits at listed regional companies had stabilized, valuations were not particularly cheap against international peers or their own historical averages.
“Investors may take a wait and see attitude as they evaluate the path and consequences of economic reform,” he wrote of GCC bourses.
Dubai’s index rose 0.5 percent as blue chip Emaar Properties added 0.6 percent, but only six of the 10 most heavily traded stocks rose.
Abu Dhabi stocks fell 0.5 percent as Dana Gas, which had soared 8.1 percent on Monday after reporting a sharp rise in second-quarter net profit last week, pulled back 4.5 percent.
Qatar’s index was flat as trading volume rose slightly from Monday’s level, which was the lowest this year. Investment Holding Group, which plunged after listing last week following an IPO at SR10 per share, rebounded 2.7 percent to SR7.72.
In Egypt, the index edged up 0.1 percent. GB Auto climbed 3.9 percent.


Saudi stocks receive landmark emerging markets upgrade from MSCI

Updated 21 June 2018
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Saudi stocks receive landmark emerging markets upgrade from MSCI

  • Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months
  • MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds

LONDON: Saudi Arabian equites are poised to attract up to $40 billion worth of foreign inflows, following a landmark decision by index provider MSCI to include the Kingdom’s stocks in its widely tracked Emerging Markets index.

"MSCI will include the MSCI Saudi Arabia Index in the MSCI Emerging Markets Index, representing on a pro forma basis a weight of approximately 2.6% of the index with 32 securities, following a two-step inclusion process," the MSCI said in a statement late on Wednesday night Riyadh time.

“Saudi Arabia’s inclusion in MSCI’s EM Index is a milestone achievement and will likely bring with it significant levels of foreign investment,” Salah Shamma, head of investment for MENA at Franklin Templeton Emerging Markets Equity, told Arab News. 

“It is a recognition of the progress Saudi Arabia has made in implementing its ambitious capital markets transformation agenda. The halo effect of such a move will be felt across the stock exchanges of the entire Gulf Cooperation Council (GCC).”

Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months to bring local capital markets more in line with international norms, including lower restrictions on international investors, and the introduction of short-selling and T+2 settlement cycles.

Such reforms prompted index provider FTSE Russell to upgrade the Kingdom to emerging market status in March, opening the country’s stocks up to billions worth of passive and active inflows from foreign investors.

MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds. The inclusion of Saudi stocks in the index, alongside FTSE Russell’s upgrade, is forecast to attract as much as $45 billion of foreign inflows from passive and active investors, according to estimates from Egyptian investment bank EFG Hermes. 

The upgrade announcement was widely expected by the region’s investment community, following a similar emerging markets upgrade announcement by fellow index provider FTSE Russell in March. 

“MSCI index inclusion will be a historic milestone for the Saudi market as it will allow for sticky institutional money to make an entry in 2019 which will help deepen the market,” said John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh.