Foreigners Slow Saudi Share Spree Even as Index Upgrade Nears

(Bloomberg) -- Foreign investors are slowing the pace at which they are buying Saudi stocks, even as the kingdom’s inclusion in major emerging-markets benchmarks lies just around the corner.

Foreign investors were net buyers of about 443 million riyals ($118 million) in Saudi shares last week, a drop of 47 percent from the previous five days and the second straight week of slower purchases. Analysts and traders are closely monitoring the appetite for the country’s shares as they are about to begin to be included in emerging-market benchmarks compiled by FTSE Russell and MSCI Inc. next month and in June, respectively.

As investors anticipate purchases before the upgrades, some emerging-markets money managers view Saudi stock valuations as too high compared with the category they’re about to join. In January, the Tadawul All Share Index reached the most expensive level relative to the MSCI Emerging Markets Index since 2015, when measured using estimated price-to-earnings in the next 12 months.

Despite the slower pace of purchases and some unappealing valuations, foreigners have been buyers for eight straight weeks in 2019, marking a reversal of a trend late last year when there was a sell-off triggered by the murder of Saudi journalist Jamal Khashoggi. On the other hand, if you measure flows since the end of the week that he went missing, foreigners remain net sellers.

Read more:

• On Feb. 5: Record Foreign Buying of Saudi Stocks as Khashoggi Worries Fade
• On Jan. 16: Saudi Stocks May Get Reality Check in 2019 After Stellar Start

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