Dubai:The MSCI said it will add Saudi Arabia’s Tadawul index to the emerging market index from close of May 28 with a weight of 1.42 per cent, the highest in the region.
About 30 Saudi stocks will be added in the first tranche, the MSCI said in a statement. The second step would come in the August 2019 Quarterly Index Review.
“The details in the MSCI for Saudi came in line with expectations and the first half inclusion will drive in $7 billion (Dh25.7 billion) later this month,” Vrajesh Bhandari, senior portfolio manager at Al Mal Capital told Gulf News.
As a result of the addition, Saudi Tadawul index was volatile and gained as much as 2.1 per cent or hit an intra-day high of 8,545.35, before closing almost steady or up by 0.08 per cent at 8,374.27.
“The Tadawul Index is dangerously close to the 200 DMA [Day Moving Average] (it bounced from that level intraday) — a break below which can further aggravate retail selling,” Bhandari said.
The Abu Dhabi Securities Exchange general index fell as much as 4.6 per cent or to a low of 4,700.22. The index later closed 2.57 per cent lower at 4,802.58.
First Abu Dhabi Bank closed 8 per cent lower at Dh14.08 as the MSCI decided to keep the weight steady.
“FAB was expected to see its weight increased in the MSCI index which led the stock to its highs over the past month. However MSCI decided to move forward with that, keeping its weight unchanged despite the new FOL,” Essam Kassabieh Senior Financial Analyst at Menacorp said.
According to Bhandari, “the same weight meant the $500m of passive inflows are not coming, and thus the stock sold off.”
Meanwhile, the Dubai index witnessed sharp recovery from the previous day’s 4 per cent fall as traders resorted to buying in Emaar Properties, Emaar Malls and Emaar Development as the MSCI decided to retain them. The Dubai Finacial Market general index closed 3.46 per cent higher at 2,612.98. Analysts said traders were sceptical, saying volatility would remain due to geopolitical issues.