Saudi Arabia’s likely inclusion in MSCI’s Emerging Market (EM) index in June will help the country attract billions of dollars in its equity market, said a new report from Al Rajhi Capital, a top financial services provider in the kingdom.

Earlier in March this year, FTSE Russell has accorded EM status to Saudi Arabia, while S&P Dow Jones has recently commenced consultation on potential upgrade for the Kingdom, according to the latest edition of Economic research.

“We believe that extensive capital market reforms undertaken in recent years by the government and MSCI’s confirmation that Saudi Arabia’s upgrade to EM status is unrelated to the Aramco IPO (which has most likely been delayed to 2019) has increased the probability of inclusion,” said Al Rajhi Capital in the report.

Further, MSCI may upgrade Saudi Arabia in tranches (like FTSE Russell); as any issues during the initial phase of trades will be addressed/resolved by the Saudi officials.

Meanwhile, recent data from Saudi Arabian Monetary Agency (Sama) has showcased signs of improvement in the economy. Sama foreign reserves have witnessed an annual rise (+1.3 per cent y-o-y) in April for the first time in more than three years, which can be attributed to the recent local and international debt issuances.

Further, credit to the private sector rose at the fastest monthly pace in 26 months (+1.4 per cent m-o-m) in April, whereas the banking claims on the public sector edged down (-0.1 per cent m-o-m).

Moreover, consumer spending has continued its robust growth, mainly driven by expenditure on entertainment notable in increased spending in ‘Restaurants and Hotels’, ‘Food and Beverage’ and ‘Clothing and Footwear’ segments.

Meanwhile, cost of living index has increased at a slower pace in April (+2.5 per cent y-o-y as against 2.8 per cent y-o-y in March), but Sama indicated that inflation is expected to pick up in Q2, owing to the rise in consumer demand during Ramadan. –TradeArabia News Service