Saudi stocks to rally on MSCI inclusion, says Credit Suisse official

Beginning June this year, Saudi Arabian stocks will be included in the MSCI Emerging Markets Index.

“The MSCI first phase is widely expected to trigger around $6 billion worth of influx. And as we’ve seen with past upgrades, that inflow momentum tends to last a little beyond the actual day of inclusion itself,” Fahd Iqbal, head of Middle East research at Credit Suisse, told Al Arabiya.

“We have previously expected the Saudi market to peak just ahead or on the day of inclusion itself, which is traditionally what we’ve seen in the past 25 years’ worth of MSCI inclusions,” he said. “We do not think it is going to be an inverted ‘V’ kind of performance, because you’re seeing Saudi Arabia included in phases.”

Iqbal added that "the performance of Saudi Arabia would be more like an inverted ‘U’ with the peak somewhere around the May-end when the MSCI inclusion occurs.”

Referring to geopolitical risk, he pointed out that “there has been complications with the risk environment globally, and so we’ve seen a very sharp correction in Saudi equities.”

On the MSCI inclusion, Iqbal predicted that it would “trigger a rally, and in a blue-sky scenario, I think a 9,400 is attainable [on the Tadawul Index]; certainly above 9,000, I believe, is quite easily attainable.”

“But it will probably last, I’m now thinking, in the next couple of weeks, just after the first inclusion date itself,” he said.