Foreigners Splurge on Saudi Stocks in March as EM Tag Comes

(Bloomberg) -- Foreign investors bought more Saudi stocks in March than ever before in anticipation of the kingdom's upgrade to emerging-market status.

Overseas investors spent a net 3.6 billion riyals ($960 million) last month on shares traded on the Tadawul, the Saudi stock exchange, according to data provided by the bourse. That's the most in a single month since the Tadawul started disclosing the data in August 2015.

Foreign investors have been net buyers of Saudi shares every week since the start of 2018 amid speculation the biggest Middle Eastern economy would earn emerging market classification from major index operators, which could drive billions in inflows from investors tracking these benchmarks. FTSE Russell granted that status to Saudi Arabia last week, with implementation starting in one year. MSCI Inc. is expected to make a decision in June.

The Tadawul All Share Index reached its highest level since 2015 before FTSE's decision on March 28, but has fallen in every session since. It's still up 7.7 percent this year, versus an increase of 1.4 percent for the MSCI Emerging Market Index.

“Even if there might be certain slow down in flows along with profit taking activity in the coming days, attractive investment cases and low foreign ownership should soon more than offset short-term outflows,” said Emre Akcakmak, portfolio adviser at East Capital in Dubai.

Inflows should continue in the next 12 to 18 months “as we will continue to see a gradual change in ownership of Saudi stocks from retail and regional institutional investors to global institutional investors,” he said.

--With assistance from Mona Saad

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, Sam Unsted

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