JEDDAH/DUBAI: Saudi Arabian stocks will likely see little impact if the country is removed from MSCI’s regional benchmarks because relatively few shares are foreign-owned, analysts told Reuters on Monday.
Index maker MSCI may scrap all indices containing securities listed on the Saudi bourse Tadawul, possibly from Aug. 24, and replace these with indices excluding Saudi Arabia, following a dispute over licensing rights, MSCI said last week. Fund managers will typically go underweight or overweight in stocks included in a benchmark, such as the MSCI Arabian Markets Index, measuring their performance against it, and exclusion of Saudi stocks could impact the market. “It’s a negative development, but the Saudi market is less dependent on foreign investors, so even if they pull out it won’t have a meaningful effect on the dynamics of the market,” said Shakeel Sarwar, Sico investment bank head of asset management.The Saudi Stock Exchange aims to develop the capital market and provide market information to all market stakeholders, locally and internationally, including investors, portfolio managers and developers of financial instruments, according to a Tadawul press release on Monday.
Tadawul said that nine local and international companies including Dow Jones Indexes, a major international index provider, have signed Tadawul Index Creation Agreement and fully agreed to comply with Tadawul’s terms in this regard.
With reference to what has been recently published by MSCI that it might be forced to discontinue its indices containing Saudi securities, Tadawul said that this regrettable position by MSCI was made by MSCI’s sole discretion as a result of their unwillingness to comply with the provisions of Tadawul agreement that have been developed to organize the process of creating indices and linking financial products to Tadawul’s information. On the other hand, Tadawul hopes that MSCI continues to provide its indices linked to Saudi stocks through Tadawul Index Creation Agreement.
— With input from agencies