MSCI’s Saudi upgrade decision is independent of Aramco IPO, official says

The global index provider MSCI's decision to include Saudi Arabia in its emerging market index is independent of its stock market's ability to absorb the estimated $100 billion initial public offering of Saudi Aramco, the world's biggest oil producer, MSCI's regional chief said.

"The Aramco IPO and the decision by MSCI is completely exclusive – independent of one another. So whether or where it lists, or how it lists is independent of how MSCI will do its decision to classify Saudi Arabia," Robert Ansari, an executive director and head of Middle East at MSCI told reports on Thursday in Abu Dhabi

"On paper, everything Saudi Arabia had to do has been done." He added that MSCI's decision is contingent on how well the structural changes the kingdom has implemented in its financial market are performing and what is the investor feedback to them.

MSCI, whose emerging market gauge is tracked by fund managers with $1.7 trillion in assets, will announce a decision on whether to upgrade Saudi stocks to EM status in June after the index provider put the country's  market on a watchlist for inclusion last year.

The much-anticipated upgrade follows a series of market reforms initiated by the kingdom, the world's biggest oil exporter and the region's top economy, designed to attract international institutions through the easing of ownership requirementsof equities by foreign investors, reducing settlement cycles, and introducing short-selling.

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If the kingdom did not get a nod from investors in June and remained on the watchlist, it will again be reviewed for inclusion in November 2019, Mr Ansari said on the sidelines of the Mena Investment Congress.

Saudi Arabia could account for a 2.5 per cent weight of MSCI’s emerging market gauge and if Saudi Aramco's IPO happens as planned in 2018, the anticipated weight would almost double to about 5 per cent, he noted.

If Saudi Arabia gets the nod in June this year that it will be part of emerging market index, that decision would become effective in June 2019. If the Aramco IPO happens in the meantime and is deemed an "eligible security" it could be a part of the MSCI's index when it launches in 2019, he added.