Foreigners Boosted Saudi Stocks the Week Aramco Woes Dominated

(Bloomberg) -- Attacks on the heart of Saudi Arabia’s oil production were not enough to stop foreigners from buying shares in Riyadh last week, with most of them tracking global benchmark indexes.

Qualified foreign institutional funds were the main net buyers of shares for the week of Sept. 19, in the aftermath of strikes on facilities of giant oil producer Saudi Aramco. That led to a cut in the kingdom’s oil output. The funds purchased about $790 million in shares, or about five times more than local institutional investors, flow data from the Saudi stock exchange showed. Saudi individuals and Gulf investors were net sellers.

The jump was mostly driven by the fourth stage of inclusion of Saudi shares into FTSE Russell’s emerging markets benchmarks. The index provider considered the closing prices of Thursday for a review that becomes effective this week. The upgrade of Saudi shares by FTSE started in March, and the fifth and last stage is scheduled for March 2020.

On Thursday, the last trading session ahead of the fourth stage of the index inclusion, large caps outperformed and added the most to the Tadawul’s performance, according to EFG-Hermes Holding’s strategist Mohamad Al Hajj. Trading volumes in Saudi shares hit $2.3 billion on the day, more than twice the average volume of the past 50 sessions.

Flows by foreigners had also jumped earlier this year after MSCI Inc.’s upgrade of Saudi shares. Meanwhile, Saudi individuals, including high net-worth investors, have been net sellers for every week of 2019, data show. Local institutions, which stepped-up purchases after the international crisis triggered by the death of columnist Jamal Khashoggi, have been mostly net sellers this year.

After dropping as much as 3.1% on the first day of trading following the attacks, the Tadawul main index bounced back in the following sessions, ending the week up 1.2%. The market was closed on Monday for a public holiday.

To contact the reporter on this story: Filipe Pacheco in Dubai at fpacheco4@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Blaise Robinson

©2019 Bloomberg L.P.