MSCI, the stock indexes of which are tracked by fund managers controlling about US$3 trillion (Dh11.01tn) of assets, said it would resume coverage of Saudi Arabia as the country is expected to open up to foreign investment.
The move follows a three-year hiatus when the index compiler was in dispute with the Saudi Tadawul All-Share Index and withdrew coverage of all companies in the kingdom.
"The reintroduced MSCI Saudi Arabia domestic indices, including large-cap, mid-cap and small-cap indices, are designed for institutional investors wishing to invest in Saudi Arabia, and who are not constrained by foreign ownership limits," the index compiler said yesterday. Saudi Arabia's stock market, the most liquid in the region, with more than $1.3 billion traded daily, has been considering a wider opening of its markets for several years. Foreigners now can invest only through indirect ownership and exchange-traded funds that track indexes.
Since MSCI's falling-out with the Tadawul in 2009, fund managers have had only two index compilers to use as a benchmark for their portfolios: Standard & Poor's and Dow Jones. As the two companies consider a merger this year, the resumption of coverage by MSCI was welcomed by the investment industry.
"For us fund managers, we favour to have more index providers in the region where we can have flexibility to choose," said Tariq Qaqish, the deputy head of asset management at Al Mal Capital in Dubai.
"The introduction of MSCI will provide more indexes to choose from that fit the product we are selling." In January, the regulator allowed public companies from foreign markets to seek a secondary listing on the Tadawul.
"It's the signal of more to come. The first start will be to include the country in its frontier indexes, and the next step would be to upgrade the country to emerging markets, which will attract more foreign investors," Mr Qaqish said. "Once the foreigners start investing, they will start questioning companies, which will bring more transparency. It's good for the industry in general."