MSCI Reintroduces Coverage of Saudi Arabian Stock Market

MSCI Inc. (MSCI) will reintroduce coverage of Saudi Arabia’s stock market in standalone country indexes after signing a deal with the biggest Arab bourse, stoking bets the nation may get emerging-market status.

MSCI said it would reintroduce the MSCI Saudi Arabia Domestic Indices and related regional indexes in June, according to a statement distributed via Business Wire. MSCI said in 2009 it would remove the country’s shares from its Gulf and Arabian equity indexes because of a dispute with the stock exchange over the licensing of information from the bourse.

“The reintroduced MSCI Saudi Arabia Domestic Indices, including large-cap, mid-cap and small-cap indices, are designed for institutional investors wishing to invest in Saudi Arabia, and who are not constrained by foreign ownership limits,” MSCI said.

Saudi Arabia has signaled it is taking steps to open up its stock market to foreign, non-Persian Gulf investors, who currently can’t directly invest in Saudi shares. Six of the Gulf region’s seven bourses are classified as frontier markets by MSCI, a designation that typically applies to economies and financial markets that are less developed than emerging markets.

Among companies trading on Saudi Arabia’s bourse are Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemicals company.

Foreign Investors

The news “will spur speculative buying as the assumption will be that the next step will be inclusion in emerging-market universe, but obviously foreign-ownership issues have to be overcome first,” said Julian Bruce, the Dubai-based director of institutional sales trading at EFG-Hermes Holding SAE.

The Saudi stock index has returned 18 percent this year, the second-best performer in the Gulf and compared with a 12 percent gain in the MSCI Emerging Markets Index. (MXEF) The measure was little changed at 7,558.47 at the 3:30 p.m. close in Riyadh today, trimming the decline for the month to 3.5 percent.

Saudi Arabia’s Capital Market Authority said in January it will allow overseas companies to list securities on the bourse.

In October, three bankers familiar with the matter said the market regulator was in talks with international banks to open the stock exchange to foreign investors in early 2012. The kingdom hasen’t set a timeline for opening up to foreigners, stock exchange Chief Executive Officer Abdullah Al-Suweilmy said in December.

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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