Saudi shares drop on fear of FTSE delay

Dubai : 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.

At the end of the business day on Sept. 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 $3.2 billion to $3.7 billion 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 per cent on Monday 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 on Monday. Samba Financial Group shed 2.9pc and dairy maker Almarai lost 3.0pc.

In Abu Dhabi, Dana Gas sank 4.1pc, taking its losses since Wednesday to a little more than 10pc, as investors awaited the outcome of a London High Court trial on the validity of its $700 million 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 United Arab Emirates. 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 0.7pc lower. In Dubai, the index fell 0.9pc as 20 shares declined and only nine rose.

Qatar’s index rose 0.6pc, however, as regional investors stepped up their purchases of Qatari shares. They accounted for roughly 10pc of total market turnover, bourse data showed.

In Egypt, the index rose 0.5pc with tourism-related companies some of the top gainers. They included Egypt Resorts, which surged 9.8pc in unusually heavy trade.