IMF raises S.Korea 2017 growth outlook, cites robust exports

South Koreans protest against North Korea and Kim Jong Un during a rally near the US Embassy in Seoul, South Korea, Monday, Nov. 6, 2017. President Donald Trump is scheduled to arrive in South Korea on Nov. 7 for a two-day visit and will meet with South Korean President Moon Jae-in. (AP/Ahn Young-joon)
Updated 14 November 2017
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IMF raises S.Korea 2017 growth outlook, cites robust exports

SEOUL: The International Monetary Fund said on Tuesday it expects South Korea’s economy to expand by 3.2 percent this year, slightly faster than it had previously forecast, as a cyclical recovery led by exports will continue through the fourth quarter.
The IMF’s mission team to South Korea said the outlook for Asia’s fourth-largest economy was improving despite elevated geopolitical tensions as global demand for its information technology products supported exports growth while private consumption was picking up.
Ballistic missile tests by North Korea and its sixth and largest nuclear test on Sept. 3 in defiance of UN Security council resolutions have been destabilising investor sentiment in the South Korean economy.
The IMF raised its 2017 GDP estimate to 3.2 percent from 3 percent projected in September. The Bank of Korea’s growth outlook is at 3 percent.
“The cyclical recovery is expected to continue,” the IMF said in a statement concluding its annual review of the South Korean economy.
IMF mission chief Tarhan Feyzioglu stressed that fiscal and monetary policies should remain accommodative to support growth as expenditure on social welfare and structural reforms remains important for overall growth.
Asked if interest rate hikes by the Bank of Korea would mean tightening, Feyzioglu said monetary policy would remain accommodative even after a couple of rate increases as the current policy rate is at a record-low of 1.25 percent.
The market consensus is that the BOK will raise interest rates for the first time in more than six years at its Nov. 30 meeting after the economy posted its fastest growth in seven years in the third quarter.


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.