Saudi stocks at 18-month high after appointment of new crown prince, MSCI update

Irshad Salim — Saudi Arabia’s stock market Tadawul ended open trading with a 5.5 per cent gain for the day on Wednesday, taking it to its highest level for 18 months.

The Kingdom’s main stock index rise on Wednesday was highest since oil prices crashed in late 2015, boosted by changes to the kingdom’s succession plans and an encouraging update from index provider MSCI.

The stock index gained more than 3 per cent in early trade after Deputy Crown Prince Mohammed bin Salman, architect of the kingdom’s economic reforms, was promoted to the post of crown prince and Deputy Prime Minister while retaining his Defense minister position along with his other ongoing roles.

After 70 minutes of active trade, the stock index was 3.4 per cent higher. National Commercial Bank, the biggest listed lender, which is expected to play a major role in funding some of the non-oil industries which Prince Mohammed bin Salman aims to develop, was the top gainer and soared 10 per cent.

Mining company Ma’den jumped 8.6 per cent; mining is a key sector in Prince Mohammed’s plans to reduce Saudi Arabia’s dependence on oil exports.

The market was also buoyed by news that global index compiler MSCI had, as expected, started to consider whether to upgrade Saudi Arabia to emerging market status. An upgrade would attract tens of billions of dollars of fresh foreign money in the Kingdom — a plan which dovetails Saudi Vision 2030.

MSCI’s flagship emerging markets index is tracked by an estimated $1.6tn of investment funds, and inclusion in the index would provoke a sharp increase in demand for Saudi equities.

Analysts at emerging-markets specialists Renaissance Capital estimated that, if successful, Saudi Arabia would become the ninth-largest country in the EM index, with a weight of 2.5 per cent, according said Financial Times.

Foreign ownership of Saudi stocks currently stands at only 4 per cent, but RenCap said inclusion in MSCI’s index would trigger at least $2.3bn of inflows from passive funds, with a potential further $9.3bn from active funds if they had a neutral recommendation. (see its chart below)

New heir, 11 other decrees issued by King Salman

On Tuesday evening, Saudi Arabia’s King Salman announced the appointment of his son, Mohammed bin Salman, as heir to the throne of the home of Islam’s holiest sites.

In a royal decree, the former Crown Prince, Mohammed bin Nayef, a 57-year-old nephew of the king, was removed as next-in-line to the throne.

He was replaced with Mohammed bin Salman, 31, who was previously the deputy crown prince.

According to the decree, the former crown prince was also relieved from his post as interior minister.

Other decrees issued by King Salman as reported by Al-Bilad English Daily online are:

1. Amending Article V from the Kingdom’s statute of ruling, which stipulates that only the sons and grandsons of the founding King Abdulaziz bin Abdulrahman Al-Faisal Al Saud can be Saudi kings and crown princes.

2. Appointing Prince Abdulaziz bin Saud bin Nayef bin Abdulaziz Al Saud as the Minister of Interior.

3. Relieving Abdulrahman bin Ali Al-Rubaiaan from his role as Deputy Minister of Interior and appointing him as a consultant in the Royal Court.

4. Appointing Dr Ahmed bin Mohammad Al-Salem as Deputy Minister of Interior.

5. Relieving Dr Nasser bin Abdulazizi Al-Daoud from his role as consultant in the Royal Court, and naming him undersecretary to the Ministry of Interior.

6. Appointing Prince Khalid bin Bandar bin Sultan bin Abdulaziz Al Saud as the Kingdom’s ambassador to Germany.

7. Appointing Prince Faisal bin Sattam bin Abdulazizi Al Saud as the Kingdom’s Ambassador to Italy.

8. Appointing Prince Bandar bin Khalid bin Faisal bin Abdulaziz Al Saud, Prince Turki bin Mohammad bin Fahad bin Abdulaziz Al Saud, Prince Abdullah bin Khalid bin Sultan bin Abdulaziz Al Saud, and Faisal bin Abdulazizi bin Abdullah Al-Sudairi as consultants in the Royal Court.

9. Appointing Prince Bandar bin Faisal bin Bandar bin Abdulaziz Al Saud as assistant to the president of the General Intelligence Directorate (GID).

10. Appointing Prince Abdulaziz bin Turki bin Faisal bin Abdulaziz Al Saud as vice chairman of the General Sports Authority.

11. Appointing Prince Abdulaziz bin Fahad bin Turki bin Abdulaziz Al Saudi as deputy governor of Al-Jouf Region.

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