Saudi Stocks Jump as Mobius Says Market Access a ‘Game Changer’

Saudi shares climbed, making their biggest weekly gain in 10 months after the Arab World’s largest exchange said it will allow foreign investors direct access next year.

The Tadawul All Share Index rose 0.5 percent to close at 10,214.73, the strongest weekly advance since September. The gauge crossed the 10,000 level for the first time in six years on July 22. Saudi Electricity Co. led the advance with a 5.8 percent gain to 17.42 riyals, the highest close since October 2006. Riyad Bank climbed to the strongest level since June 2008.

Saudi’s capital markets are “very well developed, but if they open it up to foreign investors, that will be a game changer,” Mark Mobius, who oversees more than $40 billion as executive chairman of Templeton Emerging Markets Group in Singapore, said in a Bloomberg Television interview in Hong Kong today. “If we can invest freely, of course we’ll be able to put more money in.”

Saudi Arabia’s Capital Market Authority will publish rules next month allowing trading on the Tadawul by qualified foreign financial institutions in the first half of 2015, it said in a statement on its website July 22. The measure could become part of MSCI Inc.’s Emerging Markets Index by 2017 at the earliest and may comprise as much as 4 percent of the gauge, according to Sebastien Lieblich, executive director of MSCI Index Research.

Riyad Bank added 1.7 percent to 19.10 riyals. Banque Saudi Fransi advanced 0.9 percent to 34.94 riyals, the highest level since September 2008.

MSCI Inclusion

The country’s exchange is currently limited to domestic investors and foreigners from the six-nation Gulf Cooperation Council. Overseas investors can access it through equity swaps and exchange-traded funds.

Inclusion of Saudi stocks in MSCI’s index depends on the details of the government’s plan to grant foreigners access to the market, Lieblich said.

Entry to the emerging-markets gauge could mean $40 billion of inflows to Saudi stocks, Rami Sidani, the head of frontier markets investing at Schroder Investment Management in Dubai said July 22. That compares with Exotix Ltd.’s estimate of about $32 billion.

Bank of America Merrill Lynch estimates inflows of $13.3 billion to $26.6 billion, depending on the number of stocks that may qualify for inclusion in MSCI’s index, according to a research note dated July 22.

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