Foreigners Splurge on Saudi Shares as FTSE Begins Upgrade

(Bloomberg) -- Foreign investors increased purchases of Saudi equities last week to the highest value on record as they positioned for the kingdom’s inclusion in major benchmarks.

Foreigners were net buyers of about 1.6 billion riyals ($427 million) of stocks in the five days through March 14, more than any other week since the data were first disclosed in 2015. The inflows picked up as FTSE Russell begins to include the country in its emerging-market category on Monday, attracting fund managers that follow the indexes passively.

Qualified foreign institutional investors, who were first allowed to directly access the Saudi bourse in 2015, were the leading category of purchasers. They’ve been net buyers almost every week this year, reversing a trend that started in October when they sold heavily amid increased volatility following the murder of Saudi journalist Jamal Khashoggi.

Saudi Arabia’s full inclusion in FTSE’s emerging-market category will be phased in over five tranches and completed by March 2020, while an upgrade by index compiler MSCI Inc. will happen in two stages later this year. The Tadawul All Share Index rose 1.1 percent on Monday, the most in almost six weeks, to end at the highest level since August 2015.

• On the opposite side of trades last week were Saudi individual investors, net sellers of about 1.2 billion riyals
• They were followed by local institutions and investors from the six-nation Gulf Cooperation Council, who were net sellers by 195 million riyals and 160 million riyals, respectively

The bourse will eventually receive $5 billion from passive investors once the kingdom is fully included in FTSE’s benchmarks by March 2020, Tadawul Chief Executive Officer Khalid Al Hussan said in an interview in Riyadh on Monday. He expects additional passive inflows of as much as $11 billion from MSCI’s addition later this year.

Read more:

• Saudi EM Inclusion Begs Question About Elephant in the Room
• Saudi Sovereign Fund Says Drop in Stocks Presents Opportunity
• Saudi Fund Selling Unlikely to Weigh on Stock Market: EFG-Hermes

--With assistance from Sarah Algethami.

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, John Viljoen, Tom Lavell

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