Foreigners Keep Buying Saudi Shares. Read This on a Loop

(Bloomberg) -- Qualified foreign investors from outside the Gulf were net buyers of Saudi shares by yet another record last week. It's the third time that's happened this year, and it probably won't be the last.

Foreigners were the main purchasers of shares in Riyadh in the five days ended May 2, during the second phase of FTSE Russell's inclusion of the kingdom in its emerging-market benchmarks. Buying activity should escalate later this month, when MSCI Inc. follows suit, since its indexes reference a much broader fund universe.

Those making money as foreigners arrive are mostly Saudi. Local individual and institutional investors have been net sellers almost every week this year. The institutional group includes government-related entities and mutual funds tied to the government, which stepped up purchases during an October crisis triggered by the killing of journalist Jamal Khashoggi in Turkey. As of May 2, they held about 67 percent of local shares.

The Tadawul All Share Index climbed 0.7 percent last week, its eighth straight weekly gain. But it fell as much as 3.4 percent on Monday amid a global risk-off mode sparked by trade tensions between the U.S. and China.

The index trimmed Monday's loss to 1.5 percent by the end of the session, an indication of possible buying action by local institutional investors to stem declines, according to Mohammed Ali Yasin, chief strategy officer at Al Dhabi Capital. “They can't stop it. But they will try to soften it. That usually happens toward the end the session once they absorb the full hit of the day,” he said. The gauge was down 0.3 percent as of 11:20 a.m. on Tuesday.

Read more on why the Saudi EM inclusion begs question about elephant in the room.

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, Monica Houston-Waesch, Phil Serafino

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