London/Dubai: Saudi Arabia's inclusion in major emerging markets stock indices from Monday is likely to suck in around $20 billion in passive inflows.
Saudi Arabia will be the biggest recent addition to the global indices, the largest of which is the MSCI Emerging Markets Index, which it joins from May. MSCI will give the kingdom a weight of 2.7 per cent, between Russia and Mexico.
The kingdom is hoping the inclusions, starting on Monday when Saudi stocks join the FTSE Emerging All Cap Index, will kickstart its drive to become a major destination for foreign capital.
The process should help bring in about $20bn of combined passive inflows during 2019, analysts estimate. That would push up foreign ownership from around 2pc to around 6pc, according to Al Mal Capital.
"The 2.7pc pro-forma benchmark weight (within the MSCI index) is much more significant than prior index inclusions during the past decade," said Alexander Redman, head of global emerging market equity strategy at Credit Suisse.
"And given that the proportion of assets under management within emerging markets passive funds is much larger than during previous index inclusions, it means there will be a significant amount of net foreign buying of Saudi equities."