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Saudi Arabia’s stock index fell yesterday on rumours that index compiler FTSE might not upgrade Riyadh to emerging-market status as quickly as hoped, while Qatar notched up its fifth straight session of gains.
At the end of the business day on September 29, FTSE will announce its decision on whether to include Saudi Arabia in its secondary emerging market index.
For several weeks the market had been pricing in a strong chance of an upgrade. Analysts have predicted Saudi Arabia could see around $3.2bn to $3.7bn of passive fund inflows as a result, although that would not occur until the decision actually took effect, probably in late 2018.
Two fund managers told Reuters that the Saudi stock index fell 1.4% yesterday because investors were worried that FTSE might delay the upgrade on the grounds that foreign investors lacked enough access.
“These are rumours, which cannot be validated or verified until FTSE makes the announcement — nevertheless they were strong enough to create nervousness in the market today,” said one fund manager, who declined to be named.
Shares in major companies that would probably be included in FTSE’s emerging market index were some of the worst performers yesterday. Samba Financial Group shed 2.9% and dairy maker Almarai lost 3.0%.
In Abu Dhabi, Dana Gas sank 4.1%, taking its losses since Wednesday to a little more than 10%, as investors awaited the outcome of a London High Court trial on the validity of its $700mn of outstanding Islamic bonds.
The trial focuses on Dana’s June announcement that it would not redeem its sukuk on the grounds that changes in Islamic financial practice had made them unlawful in the UAE. It is not clear when the London court will rule or whether a ruling will end the dispute, which is also being fought in a UAE court.
Most other Abu Dhabi shares were weak, dragging the index 0.7% lower. In Dubai, the index fell 0.9% as 20 shares declined and only nine rose. In Egypt, the index rose 0.5% with tourism-related companies some of the top gainers. They included Egypt Resorts, which surged 9.8% in unusually heavy trade.
Elsewhere in the Gulf, Kuwait’s index dropped 0.4% to 6,768 points; Bahrain’s index lost 0.9% to 1,292 points, while Oman’s index rose 0.6% to 5,130 points.
The stock markets in the UAE and GCC were in a tug-of-war state as investors weighed positive news on the economic front and a ‘catastrophic’ overnight explosion in Lebanon that killed at least 100.<
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