Next year’s inclusion of Saudi stocks in the MSCI and other emerging market benchmarks is a major development for MENA asset managers. How is Refinitiv helping them to prepare, including for trading on a Sunday?
- Saudi Arabia has been reclassified as an emerging market by the MSCI Index, FTSE Russell and the S&P Dow Jones, effective in 2019.
- The upgrade of Saudi stocks in the MSCI will lead to about US$45 billion of capital inflows, improving liquidity in the biggest stock market in the MENA region.
- Asset managers will have to adapt their trading platforms to accommodate new products, currencies and counterpart names.
There are big changes in store for the Middle East and North Africa (MENA) region and asset managers worldwide.
Earlier this year, the MSCI Index, the FTSE Russell Emerging Market Index and the S&P Dow Jones, all reclassified Saudi Arabia as an emerging market, effective in 2019.
More recently, Kuwait was marked for inclusion in the FTSE Russell index and will most likely find itself included within the broader MSCI index next year.
According to estimates, the upgrade of Saudi stocks in the MSCI will lead to about US$45 billion of capital inflows, helping to improve liquidity in the biggest stock market in the MENA region.
The FTSE Russell upgrade will bring in about $30 billion of new money.
The S&P Dow Jones gauges that Saudi Arabia could have a 2.57 percent weighting in its emerging market benchmark index.
Following these changes, asset managers will most likely be forced to include Saudi stocks in their portfolios. So if you want to invest, the time to prepare is now.
Perhaps the biggest challenge managers face is the adaption of their legacy technology platforms.
New products, currencies and counterpart names will need to be added into their databases. This hurdle comes alongside the unfamiliar practice of trading on a Sunday — the start of the country’s working week.
Refinitiv, however, is ahead of the game.
To give clients in the region, as well as clients wanting to trade into the region, access to a range of markets across the Middle East, REDI has recently added Sunday trading to its system.
Our FIX-based network, Autex Trade Route, already contains connectivity to many of the region’s major players.
Extending connectivity to new and existing REDI users will provide a key differentiation, bringing new focus to trading markets in the MENA region.
REDI also provides trading functionality on global stocks alongside listed derivatives contracts, enabling asset managers and traders at banks to quickly place orders across a number of different exchanges around the globe.
Combined with our Eikon data terminal and the power of FXall and Tradeweb for FX and fixed-income trading, respectively, we equip the trader with a holistic solution that meets their requirements.
MENA trading opportunities
Saudi Arabia is just the start.
Once managers get comfortable trading into Saudi Arabia, they will likely begin exploring investment opportunities throughout the region, including Kuwait, the United Arab Emirates, Bahrain, Oman, Qatar, Egypt and Morocco.
Big changes come with big expectations.
And having the right tools in place to access and navigate the MENA financial world takes the pressure off of the unknown, giving asset managers confidence to hit this market milestone running.
Any trader will tell you that to stay ahead, you have to start early. Right now that means gearing up for the Sunday opening bell.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Refinitiv, or any of its respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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