Index provider MSCI has begun a consultation to decide if Saudi Arabia should join its Emerging Markets index in May 2019.
Based on latest prices, the country would become the ninth largest in the index with a weighting of 2.5%, according to estimates by Renaissance Capital, an asset manager.
An inclusion would trigger at least $2.3 billion of inflows from passive funds and a further $9.3 billion if actively managed funds were to match the benchmark, said the firm.
In a statement, MSCI said it had observed “major enhancements to the accessibility of the Saudi Arabian equity market”. These include a move to a two-day settlement cycle, adopting delivery-versus-payment provision and introducing short selling and securities lending.
The country has also loosened rules on foreign ownership of equities, resulting in a rise in qualified foreign investors owning shares on the stock exchange.
“MSCI’s decision will rest on whether foreign investors feel the current level of opening is sufficient,” said the statement by Renaissance Capital.
MSCI announced the review at the same time it revealed it would include Chinese mainland-listed equities, known as A-shares, in the Emerging Markets index.
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