Al Rajhi Capital expects Saudi firms to join MSCI index in next review

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Al Rajhi Capital expects Power and Water Utility Company for Jubail and Yanbu (MARAFIQ) to be included in the MSCI Saudi Arabia Index during the quarterly review in August.

In addition, The Company for Cooperative Insurance (Tawuniya) is likely to be upgraded from the MSCI Small-Cap Index to the MSCI Saudi Arabia Index.  

The two companies are considered to be strong candidates. 

Furthermore, the brokerage expects Abdullah Al Othaim Markets Co. to be upgraded from the MSCI Small-Cap Index to MSCI Saudi Arabia Index. However, the chances of upgrading Saudia Dairy and Foodstuff Co. (SADAFCO) are slim. 

Al Rajhi Capital also indicated that MARAFIQ’s market cap of SAR 21 billion is substantially above the estimated cut-off. Moreover, it is also above the upper threshold of 1.5x of the reference point (SAR 11 billion), which is SAR 16.6 billion. 

Similarly, Tawuniya’s market capitalisation at SAR 20 billion is also reasonably above the upper threshold of the reference point. 

Meanwhile, the brokerage believes Al Othaim could get upgraded as its market capitalisation at SAR 13 billion above the cut-off for the standard index, albeit below the upper threshold. 

On the other hand, SADAFCO, with a market capitalisation of SAR 11 billion, has a slim possibility of being included as its cut-off is largely in line with the reference point. However, the segment number of companies may be a deciding factor for SADAFCO. 

The brokerage said there are potentially no candidates for exclusion from the existing constituents. 

Tawuniya is estimated to see the highest inflows at about $130 million, followed by MARAFIQ at $86 million. Based on the average trading value in the past three months and 20 days, it implies 14-15 days to cover the anticipated inflows for Tawuniya and 2-3 days for MARAFIQ.