Saudi Arabia’s stock exchange expects passive fund inflows of $15 to $20 billion this year as it gears up for inclusion in emerging market benchmarks, its chief executive said.
Tadawul, Saudi Arabia’s main stock exchange and the Middle East’s largest bourse, will join the FTSE Russell and MSCI emerging market indices in March and May this year, heightening interest among foreign investors in the Saudi market.
“We anticipate from the passive funds $15-$20 billion in 2019, the active side is very hard to anticipate,” Khalid al-Hussan said.
Foreigners have been net buyers of Saudi stocks since the start of the year after the market saw heavy selling in the latter part of 2018 following news of the murder of journalist Jamal Khashoggi in a Saudi consulate in Istanbul.
Since the start of the year, foreign investors have ploughed more than $1.5 billion into the Saudi market and the Saudi index is up nearly 8 percent, outperforming its Gulf peers.
Hussan said he was not concerned that foreign fund inflows would cause any excess liquidity, as the flows would be gradual.
“Over the history of inclusions you can’t avoid some volatility (but) the tranches will help reduce a lot the impact of this volatility,” he said.
The Saudi bourse has a total market capitalization of around $535 billion, with a free float of about 40 percent.
Many analysts expect the inclusion on the emerging market indices to encourage more companies to list on the market.
Hussan said that regulations to allow companies from other Gulf countries to list on Tadawul are expected to be finalised in the second quarter, adding there is good interest.
He also said he is still committed to listing the stock exchange, but an initial public offering will come this year.
“We are going through massive changes, so it is about the right time…we are making sure we are selling the right assets at the right time to investors.”