MSCI has upgraded Saudi Arabia to Emerging Market status from its previous classification of Standalone Market in its Annual Market Classification Review.

The kingdom will be included in MSCI’s Emerging Market Index in two phases concurring with the May 2019 Semi Annual Index Review and the August 2019 Quarterly Index Review.

The Saudi Arabia Index, with 32 securities, is expected to have a weighting of 2.6 per cent within the MSCI Emerging Markets Index.

The Saudi Stock Exchange (Tadawul) is the kingdom’s only exchange for listing and trading in securities. It has a market capitalisation of over $522bn and is the 23rd largest stock market among the 68 members of the World Federation of Exchanges. It makes up 48 per cent of total GCC market capitalisation and 75 per cent of value traded.

Saudi Arabia plans to privatise a wide range of state entities in the coming years as part of Vision 2030. The largest IPO is for national oil company Saudi Aramco, which plans to float 5 per cent of its shares in 2019.

Saudi Arabia was added to the MSCI Emerging Market Index Watch List in June 2017.

When announcing its decision to upgrade Saudi Arabia, Sebastien Lieblich, MSCI managing director and global head of equity solutions, said: “International investors were impressed by the speed of change in the accessibility of the Saudi Arabian equity market and the level of commitment that the Capital Market Authority (CMA) and the Saudi Stock Exchange (Tadawul) have demonstrated.

“Their expectation now is that the current privatisation effort in Saudi Arabia will continue to grow the investable opportunity set available to them and hence, all other things being equal, contribute to an increased weight of Saudi Arabia in the Emerging Markets Index in the future.”

In a similar move, Saudi Arabia was upgraded to Secondary Emerging status in the FTSE Russell Global Equity Index Series in late March. The kingdom had been registered as ‘unclassified’ since it was added to the FTSE Russell watch list in 2015.

MSCI announced that it will include the MSCI Kuwait Index in its 2019 Annual Market Classification Review for a potential reclassification from Frontier Markets to Emerging Markets status. The UAE and Qatar were upgraded to Emerging Market status by MSCI in 2014.

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