Second phase of MSCI inclusion to ‘slightly’ impact Tadawul: Analysts

The second phase of Saudi Arabia’s inclusion in MSCI Emerging Markets (EM) Index will have a minimal impact on the Saudi Stock Exchange (Tadawul), analysts surveyed by Argaam said.

The local equity market will rather be affected by other factors, mainly oil prices, trade wars and global markets amid forecasts for a pick-up in trading volumes due to implementation of the second and last phase of MSCI upgrade.

In addition, an increase in foreign ownership will render Tadawul more vulnerable to global markets.

Tadawul is likely to slide 5% in the next six months, hit by oil prices, geopolitical tensions and corporate earnings, said Vrajesh Bhandari, CFA Senior Portfolio Manager at Al Mal Capital.

“Investors will also seek to sell heavy weights on MSCI Index, as those stocks will not attract strong cash flows,” Bhandari said.

Sharing the same viewpoint, Muhammad Faisal Potrik, Senior Vice President and Head of Research at Riyad Capital, shrugged off any significant impact from the second phase of inclusion in MSCI index.

The Saudi benchmark index will be affected by corporate earnings, dividends and global market outlook.

“The Saudi stocks will be more impacted by global markets amid increased foreign ownership,” Potrik added.

The second and final tranche of inclusion of MSCI Saudi Arabia Index will be implemented this month based on closing prices of today Aug. 27, 2019, Argaam earlier reported.

The upgrade will raise the weight of Saudi Arabian securities from 1.45 percent to 2.83 percent in the MSCI Emerging Markets Index.