Saudi Telecom May See Significant Inflows If PIF Sells Stake

(Bloomberg) --

The Middle East’s biggest telecoms company may see significant inflows after Saudi Arabia’s sovereign wealth fund sells part of its 70% stake. 

Shares in Saudi Telecom Co. dropped 3.3% on Sunday, the most since March 2020, after the Public Investment Fund said it may sell part of its holding. The PIF plans to retain more than a 50% stake. 

The deal could generate “decent” inflows, according to Ahmed El Difrawy, head of data and index research at EFG-Hermes. If the PIF sells a 20% stake, Saudi Telecom could see inflows of up to $1.4 billion from passive trackers of the MSCI and FTSE Russell indexes, he wrote in a note. 

“The increase in free float is positive but we believe it may take some time to sell” and get reflected in those indexes, according to Pritish Devassy, the head of equity research at Al Rajhi Capital. “Irrespective of the fundamentals, the concern for some participants could be that there would be selling pressure because of the stake sale.”

Still, the volatility will likely be temporary, he said. “It would be a good time to add for a long term investor.” 

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