Saudi Arabia edges closer to EM status – MSCI

Index compiler MSCI says Saudi Arabia’s market reforms should help the country gain emerging market status but gave no promises for when that might happen.

The firm listed several “positive developments” in Saudi Arabia such as the country’s plan to shift to a two-day settlement cycle and introduce a delivery-versus-payment system.

“MSCI specifically recognises the extent and the pace of change undertaken by the Saudi Arabian authorities to open the local equity market to international institutional investors,” said the firm, in a statement.

However, MSCI said it will be June, at the earliest, before a review can begin of Saudi Arabia’s suitability to join its widely followed Emerging Markets index. The company said it requires positive feedback from market participants before it will add Saudi Arabia to the review list.

One of the developments praised by MSCI was Saudi Arabia’s move, on January 1, to spin off the central securities depository (CSD) activities of the Saudi stock exchange into a separate entity.  MSCI also drew attention to a public consultation on a new market operating model, disclosed by the stock exchange on January 9.

Ever since Saudi Arabia announced, in July 2014, that it would open its stock market to direct investment from qualified foreign investors, analysts have speculated about when the country would join MSCI’s indices.

The market capitalisation of the Saudi exchange is currently about $450 billion having fallen by more than a third from its peak in 2014.

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