Dubai: Enhancements in trading infrastructure in Saudi Arabia, which houses the region’s biggest equity market, will only improve the chance of its inclusion in the MSCI Emerging market index, according to Bassel Khatoun, Chief Investment Officer MENA Equities, Franklin Templeton Investments.
The Tadawul bourse amended the settlement cycle to T+2 for all listed companies and eliminated the cash pre-funding by the exchange, enhanced the custody controls, and introduced Delivery versus Payment Model.
“Such changes form part of a broader strategy to upgrade the post trade infrastructure in Saudi, in order to bring it in line with international standards,” Khatoun said.
“Moreover, these measures will allow greater effectiveness of post trade processes whilst also reducing market systemic risk,” he added.
Inclusion:
The reforms and outreach to investors are also helping Tadawul prepare for anticipated inclusion in emerging market indices such as Morgan Stanley Capital International (MSCI), the Tadawul bourse said in a statement earlier in the month.
“Implementing these changes in a timely manner will greatly improve its chances of MSCI EM inclusion by 2018 for 2019 implementation,” Khatoun said.
Over the next 24 months, Franklin Templeton expects inflows of $40-50 billion (Dh146.8-183.5 billion) in the Mena region on expectations of inclusion of Saudi Arabia and Kuwait in the MSCI Emerging market index, along with the Aramco’s addition.
The regional share could take the weightage in the MSCI emerging market index to 8.15 per cent from the current 2 per cent, which would translate into massive inflows.
