Global Index decides on Wednesday if it includes Argentina and Saudi Arabia

Cornelia Mascio
Giugno 23, 2018

Many of those developments have fulfilled criteria set by the MSCI Market Classification Framework that must be met in order for a market to be classified as Emerging Market in its indices, stated the global equity indices provider.

Saudi Arabia is expected to be included in the Morgan Stanley Capital International (MSCI) emerging market index. Argentina's bourse, which now has a market capitalization of US$ 98 billion, was relegated in 2009 after Buenos Aires introduced capital controls. Mark Mobius, who has gained a reputation for being optimistic more often than not on emerging markets prospects, said earlier this month he isn't completely bullish on Saudi Arabia because the range of offerings is limited and a number of restrictions are still in place.

MSCI provides almost 100,000 daily indexes of stocks, bonds and other assets worldwide.

MSCI has announced that it will evaluate the potential reclassification of Kuwait from frontier markets to emerging markets status in its 2019 annual review.

MSCI said on Wednesday it will begin including Saudi Arabia in that classification, sharply broadening the investor base for in a move that could be supportive to Tadawul's equity market, reported Reuters. It added that the inclusion of some domestic Chinese shares in its emerging markets index this year is going smoothly so far, according to its clients.

On the major upgrade, Mohammed El-Kuwaiz, the chairman of the CMA, said: "This decision shall enhance the diversity of the investors' base as well as the liquidity of the Saudi Capital Market".

The decision, which came as part of MSCI's semi-annual index review, follows the implementation of regulatory changes in the Saudi Arabian equity market which opened to worldwide institutional investors.

Maurel estimates it will lead to $35 billion of inflows.

"Saudi Arabia is a reform story on many levels".

CNBC says the inclusion comes amid high anticipation over the market listing of Aramco, which could be the largest publicly-traded company globally.

Ha In-hwan, an expert at SK Securities, said foreign investors would take around 7.9 trillion won out of the local stock market in favor of new destinations.

Returning to "emerging" status would see the MSCI Argentina index cut to ten from 15 constituents. "Saudi's inclusion in MSCI will definitely prompt large global investors to invest in the Kingdom, with a rub-off effect on the whole region".

In Argentina, hopes for an upgrade had faltered as the peso tumbled, making the central bank jack up interest rates to a world-beating 40 per cent and leading the government to turn to the International Monetary Fund for a record US$50 billion credit line. Accordingly, the share of South Korean stocks can decrease further.

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. This stands in stark contrast to capital inflow to equity funds in advanced countries.

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