The Saudi Stock Exchange (Tadawul) has announced that MSCI, a leading provider of global equity indices, has upgraded the kingdom to "Emerging Market" from its previous "Standalone Market" status in its Annual Market Classification Review.

The kingdom, which was also recently added to the FTSE Russell as a "Secondary Emerging" market in March 2018, will be included in MSCI's Emerging Market Index in two phases concurring with the May 2019 Semi Annual Index Review and the August 2019 Quarterly Index Review.

In its decision, MSCI cited the further market enhancements introduced by Tadawul and the Saudi's Capital Market Authority (CMA) during the past year since being added to MSCI's Emerging Market Index Watch List last June.

Many of those developments have fulfilled criteria set by the MSCI Market Classification Framework that must be met in order for a market to be classified as Emerging Market in its indices, stated the global equity indices provider.

The Saudi Arabia Index, with 32 securities, is expected to have a weighting of 2.6 per cent within the MSCI Emerging Markets Index, it added.

On the major upgrade, Mohammed El-Kuwaiz, the chairman of the CMA, said: "This decision shall enhance the diversity of the investors' base as well as the liquidity of the Saudi Capital Market. We, at the CMA, will continue to further develop the Saudi Capital Market to ensure that the market facilitates investments, promotes confidence and protects investor and market participants."

Welcoming the MSCI move, Sarah Al Suhaimi, the chairperson of Tadawul, said: "Today's announcement from MSCI, so close on the heels of Saudi's reclassification in the FTSE Russell Global Equity Index Series, marks the further integration of the kingdom into global capital markets."

"It is the culmination of Tadawul's ongoing efforts to work closely with Saudi regulatory authorities and leading emerging market investors to implement far-ranging reforms and market enhancements in bid to boost the effectiveness of the Saudi capital market and foster an attractive investment climate for local and international investors," observed Al Suhaimi.

"We are proud that these efforts have gained Saudi Arabia inclusion in the leading global indexes and benchmarks," she added.

Tadawul CEO Khalid Al Hussan said: "Inclusion in the MSCI Emerging Market Index is an important milestone and further affirmation of the tremendous progress Tadawul has made in the past year in broadening investor access to the Saudi capital market, enhancing market efficiency and further aligning market practices with global best practices."

"Our work is never done, and additional market enhancements are in the pipeline as we continue to strengthen and grow investor confidence in the Saudi market," he added.

Saudi Arabia was added to the MSCI Emerging Market Index Watch List in June last year. In its February 2018 Consultation on the proposed reclassification of Saudi Arabia to Emerging Market, MSCI highlighted the kingdom's progress in implementing positive market reforms across a range of market accessibility criteria, including foreign ownership limits, easing of registration requirements for Qualified Foreign Investors (QFIs), enhancements to the clearing and settlement process and introduction of securities lending and short selling.

Since then, Tadawul and the CMA have continued to move ahead with implementation of significant market reforms and enhancements as part of Saudi Arabia's Vision 2030 economic transformation program, which in part seeks to bring the Saudi market into alignment with its emerging and developed market peers, it added.-TradeArabia News Service