Singapore Markets closed

Saudi regulator expects $40 billion foreign fund inflows after MSCI

By Marwa Rashad

By Marwa Rashad

RIYADH (Reuters) - MSCI's addition of Saudi Arabia to its emerging markets benchmark could help attract $40 billion (30.4 billion pounds) in foreign inflows from funds and boost the appeal of oil giant Saudi Aramco's proposed initial public offering, a senior Saudi official said.

Inflows are expected from both passive and active funds, Mohammed bin Abdullah Elkuwaiz, chairman of the Saudi Capital Market Authority (CMA), told a news conference in Riyadh.

He said the Saudi bourse operator and CMA are making sure the necessary framework is in place for the Aramco IPO, which Saudi officials have said could raise $100 billion. The exact timing of the listing is uncertain and will depend on the company's readiness and its likely valuation, although next year is seen as most likely.

The processes of index inclusion and the Aramco IPO are related but not necessarily linked, Elkuwaiz said.

MSCI's move comes three months after another index provider, FTSE Russell, also gave Saudi Arabia emerging market status.

Inflows to Saudi Arabia could be bolstered further by the listing of state-owned Saudi Aramco [IPO-ARMO.SE], which is expected to become the world's largest publicly-traded company.

Khalid al-Hussan, CEO of the Tadawul, as the Saudi bourse is known, said MSCI's move has created market capacity to absorb liquidity and will be the main element in feeding new IPOs.

But he said passive investors tracking the MSCI index will only get access to the Saudi market next year, although active investors can participate in IPOs now.

The MSCI Saudi Arabia Index will have a weighting of approximately 2.6 percent in the emerging markets index, with 32 securities, following a two-step inclusion process in May and August next year.

(Reporting by Marwa Rashad; Writing by Saeed Azhar; Editing by Davide Barbuscia)