Saudi moves sideways after winning FTSE emerging market status

RIYADH: Saudi Arabia's stock market moved sideways in early Thursday trade after index compiler FTSE Russell said it would upgrade Riyadh to emerging market status, a move expected to draw billions of dollars of fresh foreign money in the next two years.

FTSE's decision is extremely positive for the market in the long term, and is expected to be followed by a similar decision by rival index compiler MSCI in June.

But it will only take effect in stages between March and December 2019. Only then will passive funds linked to the index begin flowing in.

Also, the Saudi market had already risen over 9 percent this year in anticipation of FTSE's decision, leaving stocks vulnerable to moderate profit-taking, fund managers said.

The Saudi stock index edged down 0.1 percent in the first 45 minutes as top performers of recent weeks, which are expected to be major members of FTSE's index, languished. Al Rajhi Bank was up 0.2 percent and Saudi Basic Industries was down 0.1 percent.

"Significant inflows are expected in coming days, especially for the banking sector and petchems, so there is little downside," said one local fund manager.

But a monthly Reuters poll of fund managers published on Thursday found 46 percent expected to raise their Saudi equity allocations over the next three months and 23 percent to reduce them.

That positive balance was significantly below the result of the previous two polls, in which 69 percent expected to raise allocations to Saudi Arabia and none to cut them.

In Kuwait, which FTSE will upgrade to emerging market status in September, the index was 0.2 percent higher on the back of several top blue chips.

National Bank of Kuwait climbed 2.6 percent, Zain was up 1.3 percent and Agility added 1.1 percent. All three are on an indicative list of 10 which are likely to join FTSE's emerging market index. FTSE published the list on Wednesday and will release a final list on Aug. 24.

Qatar's index gained 0.5 percent as Doha Insurance added 4.7 percent, although Qatar First Bank dropped 5.7 percent after reporting that its annual net loss widened slightly from the previous year.

In Dubai, the index rose 0.4 percent in a broad-based rally, with blue chip Emaar Properties bouncing 1.4 percent after trading near 22-month lows in recent days.