RIYADH — Saudi Arabia's plan to give foreigners direct access to its $580 billion stock market will help expand opportunities for global institutional investors but MSCI Inc. will only consider adding it to its emerging markets basket after gauging the effectiveness of the opening, the index compiler said. In a much awaited move, the Middle East's biggest economy—and one of the last major markets globally to restrict foreign investments—will allow international investors from June 15 to invest directly in some of the fastest-growing companies in the region. MSCI welcomed the opening of the Saudi market. It will, however, consider a proposal to include Saudi Arabia in the emerging markets index only after assessing the “accessibility” and based on “feedback from international investors,” the indexer said in its annual market classification review late Tuesday. Classification as an emerging market by compilers such as MSCI is highly coveted as these indexes are tracked globally by hundreds of billions of dollars. Analysts have estimated that the kingdom could see up to $40 billion in additional inflows from funds that use these benchmarks after it is rated as an emerging market. MSCI in May told The Wall Street Journal that Saudi Arabia's plan to open up has generated strong interest among fund managers. And given its size, it would likely be classified as an emerging market, though the earliest that can happen would be in mid-2017. Several international investors have said they want to see how the first months of the market's opening play out before investing in Saudi Arabia. MSCI said it would seek feedback particularly on the newly introduced rules, and potential constraints resulting from the 20% foreign ownership limit applied to listed securities. It will also look out for what market participants have to say about the settlement cycle for equities and the need to segregate the custody and trading accounts to mitigate risk, it added. — Agencies
