Saudi closes at near four-year high as it joins FTSE Russell index

Saudi Arabia’s benchmark stock index closed at its highest in nearly four years on Monday as bank shares rose on its first day as a member of FTSE Russell’s emerging-market index, which is expected to attract billions in passive fund inflows.

Saudi’s Tadawul index will have a weighting of 2.9 per cent in the FTSE Emerging All Cap Index and later this year will join the MSCI emerging market benchmark.

The market is positioned for passive fund inflows of around $20bn.

The kingdom is hoping its inclusion in the indexes will fuel its drive to become a major destination for foreign capital.

In the short term, the upside is limited since this was a well-flagged event, Al Mal MENA Equity Fund said in a note.

In the long-term there are positive implications not just for the Saudi market but for the region as a whole. With foreigners, there will be more institutional participants who are research-driven and bringing more discipline to the market, the note added.

Saudi Arabia’s listed companies could see holdings by foreign investors rise to 10 per cent when shares are included in index providers MSCI and FTSE’s emerging markets indices, Tadawul’s Chief Executive told Reuters.

The index has gained 10 per cent this year, outperforming its major Gulf peers, and foreigners have led the buying, with foreign investors now net buyers of SAR9.6bn of stocks year-to-date, Arqaam Capital said.

Saudi’s Tadawul index rose 1.1 per cent with 159.2 million shares traded for a value of SAR3.6bn ($960m).

Al Rajhi Bank gained 0.8 per cent and blue-chip petrochemical maker Saudi Basic Industries (SABIC) added 1 per cent.

“We expect SABIC to see the biggest inflow of more than $110m while Al Rajhi and National Commercial Bank are close behind,” Nick Wilson, chairman of the Gulf Investment Fund Plc, said.

Abdullah Abdul Mohsin Al Khodari Sons surged 10 per cent. The stock has risen since shareholders voted against the dissolution of the company.

The Abu Dhabi index rose 1.8 per cent, lifted by a 3.2 per cent rise in First Abu Dhabi Bank. International Holding climbed 5 per cent after it called a shareholders’ meeting to approve a capital increase by Dhs1.31bn ($357m).

Dana Gas gained 1.8 per cent. On Sunday, the firm approved plans for a sukuk buyback and said it plans to seek approval to buy back 690 million shares.

In Dubai, the index was up 1.6 per cent with Dubai Islamic Bank gaining 3.2 per cent. The emirate’s largest listed developer, Emaar Properties, rose 2.2 per cent after saying its board will meet on Wednesday to discuss the proposal for a full-year dividend.

Marie Salem, director capital markets at FFA Private Bank Dubai, said foreigners are continuing to accumulate bank shares across the United Arab Emirates.