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Data from EPFR shows that interest in Saudi Arabian equities has really picked up in 2018, whilst the country's benchmark Tadawul All-Share Index has surged 7.5%. This has primarily been driven by three factors:

  • The expected inclusion of Saudi Arabian stocks into the FTSE Russell EM Index in March and then the larger MSCI EM Index in June.
  • Planned SOE privatisations, which includes the potential USD2tn IPO of Saudi Aramco. The Saudi government plans to increase the number of companies listed on its stock market by nearly 50%, from 170 to 250 companies over the next four years, with an 80-strong IPO pipeline.
  • The ambitious Saudi 2030 vision (first announced in 2016) that looks to open up the country's capital markets and reduce the country's oil dependence, which supports the longer-term investment case for the Kingdom. This was needed after a plunge in crude prices crippled the nation's finances.

Based on this, we recommend a LONG POSITION in the iShares Saudi ETF as history suggests that ahead of the June announcement from the MSCI and in the weeks after actual inclusion, the Saudi stock rally will continue, driven by inflows.

We also believe that Saudi stocks offer a longer-term bullish narrative and we suggest remaining LONG SAUDI STOCKS targeting a climb in the Tadawul All-Share Index to 8,497 area in the long-term.

The full report explores the recent flows into Saudi Arabian equities, looks at the previous impact of EM index inclusion on country stock markets and explores in detail the above bullish Saudi Arabian stock market trade ideas. To access this report please click on the attached PDF below;

Saudi_Arabia_EM_Status_Mar2018.pdf


Fundamentals: christopher.shiells@informagm.com and robert.graystone@informagm.com

Technicals: andrew.dowdell@informagm.com

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