Saudi Arabian Stocks Advance as Trio of Catalysts Boosts Trading

You wait for a Saudi market catalyst, and then three come along at once.

21/06/2017 12:27 AST

Saudi Arabia’s Tadawul All Share Index rose 2.3 percent at 10:12 a.m. in Riyadh as traders embraced a trio of key announcements. Hours after global index provider MSCI Inc. opened the way for Saudi Arabian stocks to be included in its gauges, ruler King Salman enacted a palace shakeup and restored a raft of benefits for state employees.

The developments have the potential to supercharge Saudi equities as investors weigh expected passive inflows, an emboldened economic reform platform and consumers with more cash to spend. Food and beverage companies were the biggest winners as every sector of the 172-member index advanced. Intraday trading volumes were more than three times the 20-day average.

It’s a pivotal time for the kingdom. Stung by the slump in oil prices, Saudi Arabia has moved to overhaul its economy, and the ability to lure investment from overseas will be key to its plans. Inclusion in MSCI’s indexes, which is likely but not assured, could see inflows to the stock market of the order of $9 billion, according to a calculation by HSBC Holdings Inc.

Meanwhile, the retroactive restoration of benefits to state employees is a boon because the government is one of the country’s biggest employers and a driver of economic growth. Removal of the bonuses and allowances in September sparked a 3.8 percent decline in Saudi Arabia’s benchmark index.

The potential boost to consumption may add momentum to an already improving corporate outlook in the kingdom. Shares have been getting cheaper even as they trade sideways, based on expected earnings.

Bloomberg