Saudi Arabia Sees MSCI Emerging Markets Inclusion by End-2018

Saudi Arabia is on course to join MSCI Inc.’s emerging-markets index in 2018, according to the chairman of the market regulator, after the kingdom gave foreign investors greater access to its almost $400 billion stock exchange.

The regulator this week made changes including lowering the amount qualified foreign financial institutions must have under management to access the market and increasing the stake they can own in a company. The amendments “should be enough to put the Saudi market on the watchlist hopefully within 2017,” Mohammed Al-Jadaan, chairman of the Riyadh-based Capital Market Authority, said in a TV interview with Bloomberg Markets Middle East. After that it normally takes four quarters for inclusion in the index, he said.

The stock market known as Tadawul and the largest in the Middle East is relaxing barriers to overseas investors as it steps up efforts to lure foreign cash to the country. Stung by a more than 50 percent decline in the price of oil in the past two years, Saudi Arabia is undertaking an unprecedented overhaul of its economy to wean itself off energy revenue.

“Next month, we have an investment forum in New York and the month after, we have another one in London,” Al-Jadaan said. The aim is “to try and support Tadawul’s efforts and show the capabilities of the market,” he said.

Aramco IPO

Meanwhile, the market’s systems and facilities are ready for the potential initial public offering of Saudi Arabian Oil Co., Al-Jadaan said. The government plans to sell up to 5 percent of the company known as Saudi Aramco in early 2018 as part of Deputy Crown Prince Mohammed bin Salman’s initiative to transform the economy.

Aramco is thought to be the world’s most valuable company, and even a small stake sale may be the largest IPO in history.

“I don’t think local demand would be able to cover that size that they are talking about,” Al-Jadaan said. But the international demand is there and “that’s why we’re making sure that we will be able to get foreign demand into the Tadawul,” he said.