Saudi index cheers new crown prince, MSCI news

22/06/2017 01:05 AST

Saudi Arabia’s stock market jumped over 5 per cent on Wednesday after the architect of the kingdom’s economic reforms was appointed crown prince and index compiler MSCI said it would consider upgrading Riyadh to emerging market status.

The stock index surged 5.5 per cent, its largest single-day rise since August 2015, to 7,335 points, its highest level since December 2015. Trading volume was the largest this year.

Fund managers said the appointment of Prince Mohammed Bin Salman, previously deputy crown prince, to be first in line for the throne was not unexpected, but came sooner than anticipated.

“For the first time in two years, investors will feel reassured that the economic reform plan Vision 2030 will not be scrapped,” said Ayham Kamel, director of the Middle East and North Africa at consultancy Eurasia Group.

National Commercial Bank, the biggest listed lender which is expected to help arrange the privatisation programme and play a major role in funding some of the new non-oil industries, soared 10 per cent.

Mining company Ma’den jumped 9.7 per cent. Mining is a key sector in Prince Mohammed’s plans to cut the kingdom’s reliance on oil.

Real estate developers were also strong, especially those that are working with the government on projects. Emaar the Economic City, which is developing an industrial city near Jeddah, shot up 10.2 per cent.

To mark Prince Mohammed’s promotion, the government said it was restoring financial allowances to civil servants retroactively to last September. This did not appear to involve a lot of money - Mazen al-Sudairi, head of research at Al Rajhi Capital, estimated 8 or 9 billion riyals ($2.1 billion to $2.4 billion) - but it lifted investor sentiment.

The market was also buoyed by news that index compiler MSCI would, as expected, start to consider whether to upgrade Saudi Arabia to emerging market status.

The Gulf Today