S&P Dow Jones upgrades Saudi Arabia to emerging market

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02:17

The Saudi government has taken steps to diversify the nation's economy, including opening up its stock market. The move has led the S&P Dow Jones to upgrade the country to emerging market status.

Traditionally, foreign investors haven’t been big buyers of Saudi stocks. But its recent inclusion in the S&P Dow Jones could mean more money coming in. The index said that its decision to upgrade the kingdom’s exchange was down to wider reforms across the country.

“In the last couple of years, the Saudi government has taken steps to both diversify their economy and to make the market much more accessible. It is now becoming much easier to access and much more attractive to a lot of investors. And, therefore, it will become an emerging market,” explained David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

A Saudi trader observes the stock market on monitors at Falcom stock exchange agency in Riyadh, Saudi Arabia in February 7, 2018. /VCG Photo

As part of its ambitious economic reform plan called Vision 2030, the government has made it easier for foreigners to invest in Saudi stocks. It has cut red tape in recent years and has lowered investor requirements.

Regional investment bank, EFG Hermes, expected that the reforms and the recent upgrades might bring 30 to 45 billion US dollars of inflows into the kingdom’s markets in the next two years.

“These upgrades are extremely significant because you’re talking about a few trillion US dollars of assets benchmarked against the MSCI and FTSE [indices], right. So, there is a huge upside potential for Saudi, and with these upgrades materializing probably twelve months from now,” said Aarthi Chandrasekaran, Vice President at SHUAA Capital.