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Saudi Arabia may rise after green light from MSCI

Saudi Arabia has not issued any licences to foreign investors yet but the prospect of an MSCI upgrade may encourage more fund managers to apply for them in coming months.

DUBAI, June 10 (Reuters) – Saudi Arabia’s stock market may rise on Wednesday after index compiler MSCI launched a lengthy process that may eventually result in the kingdom being included in its list of emerging markets, attracting tens of billions of dollars in fund inflows.

MSCI said late on Tuesday it would seek feedback from investors on the accessibility of Saudi Arabia’s equity market following its opening on June 1 and gather information before considering whether to add the Saudi index to the review list for potential inclusion in its emerging markets index.

Although the actual inclusion may happen no earlier than in 2017, the news is likely to boost sentiment on the Riyadh bourse as MSCI has estimated eventual fund inflows at $27 billion, and the figure could increase if the kingdom relaxes its strict foreign investment rules.

Saudi Arabia has not issued any licences to foreign investors yet but the prospect of an MSCI upgrade may encourage more fund managers to apply for them in coming months.

MSCI last month published a standalone Saudi Arabia stock index to show which stocks are likely to be included in its global benchmark. It includes 19 names in sectors such as petrochemicals, banking, telecommunications and food.

Also on Tuesday, MSCI delayed the inclusion of Chinese domestic shares in the same emerging markets index, a move which could boost stocks which are already in the benchmark, such as blue chips from Qatar, the United Arab Emirates, and Egypt, because it means funds will not need to make room for additional allocations in the near future.

Another positive factor for Gulf equities is oil, which has climbed above $65 per barrel in Asian trade on Wednesday after jumping more than 3 percent on Tuesday.

In Egypt, Commercial International Bank may rise after it agreed to buy Citigroup’s consumer banking business in the country.

(Reporting by Olzhas Auyezov; Editing by Sunil Nair)