Published: Sat, June 23, 2018
Finance | By Gustavo Carr

MSCI adds Saudi Arabia Argentina to emerging markets index

MSCI adds Saudi Arabia Argentina to emerging markets index

NY time on Wednesday.

Every June, MSCI announces the results of its evaluation of the equity markets for countries around the world, to determine each country's classification as a developed, emerging, frontier or standalone market. Finally, social reform continues unabated leading to new investment opportunities across the economy. "From this year, stronger U.S. dollar and rising United States rates could continue to attract buyers, especially for Saudi banks", he said.

Ziyad Al-Ashaikh, Deutsche Bank's chief country officer for Saudi Arabia, said: "This represents a major milestone".

This chart shows the size of the two stock markets relative to the $18 trillion emerging-market universe.

In 2017 MSCI surprised markets by not promoting Argentina, saying it needed more signs that reforms were "irreversible". By contrast, waning confidence in Argentina's economy, a currency slump and one of the world's highest inflation rates is shrinking the Buenos Aires market.

However, investors remained nonchalant about it as Tilney's managing director Jason Hollands said the impact on emerging market funds will be "marginal", as market cap weighted exposure to Saudi and Argentinian stocks will be very small in the context of China, South Korea, Taiwan and India. That changed during the past year as Crown Prince Mohammed Bin Salman carried out a global charm offensive. Foreign investors sold 215.9 billion won (US$193.46 million) worth of stocks on the KOSPI market on the same day, going on a net selling spree for six days in a row. The timing of the initial public offering is uncertain, although next year is considered more likely.

More news: Catholic priest slaps infant across the face before baptizing him

However, Kuwait is also being considered for emerging market status, which could see the weight of the other three African countries increased further still.

President Mauricio Macri, who came into office in 2015, rolled back protectionist measures of his predecessor, Cristina Fernandez de Kirchner. But nearly three years later, the economy is under stress, the peso is in free-fall and foreign investors are moving away from equities. The fact that Saudi Arabia may be coming in to the EM index obviously means that it broadens the index and gives fund managers a bit more choice. Saudi Arabia has an exciting investment story and we want to ensure we are part of its ambitious agenda to reform its capital market.

The meeting coincided with the opening of the Saudi market in Riyadh.

Khalid Al-Hussan, Chief Executive Officer of the Saudi Stock Exchange (Tadawul), speaks during a news conference after the inclusion of MSCI EM to the Saudi Stock Market in Riyadh, Saudi Arabia June 21, 2018.

The jury's still out on Argentina's reclassification. According to a survey of Bank of America investors cited by Bloomberg, 56% thought that Argentina should be promoted, but only 38% believed that this could happen. The change could attract billions of dollars of foreign-investment flows from index-tracking funds.

Like this: