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MSCI expects to include Aramco in Saudi Arabia index from time of IPO

Reuters  |  DUBAI 

(Reuters) - International equity index compiler said it expected to include in its Arabia Index from the time of the giant's IPO, potentially triggering a big flow of funds into the as soon as they list in

"will be included in the Arabia Index at the time of the IPO as long as it fulfils all eligibility criteria, including the listing of the company's on an eligible stock exchange and related market segment e.g. Tadawul's Main Market," said late on Thursday.

The government plans to raise tens of billions of dollars by selling about 5 percent of during the second half of this year, in what could be the world's largest-ever initial public offer of

"Passive" funds tracking the Arabia Index would flow into as soon as the company became part of that index.

This could potentially cause instability in the stock price and make it hard for some investors to obtain the shares, given the company's limited float and the market's relatively small capitalisation of about $450 billion at present.

In addition to listing in Riyadh, authorities have said they aim to list it in at least one foreign market, which could make it easier for the bourse to absorb the But said on Thursday that it was still not clear whether any secondary exchange outside Arabia would host

Meanwhile, plans to decide in June this year whether it will upgrade Arabia to emerging market status - a step that would trigger fresh inflows of foreign money into and other stocks.

A positive decision this June would probably mean the upgrade taking place from mid-2019.

This week regulators announced market reforms designed to convince to make the upgrade. Requirements for foreign institutions to qualify as investors will be eased, custody rules changed and the method of determining closing stock prices reformed.

welcomed the changes on Thursday, saying they "should be an important step toward increasing the efficiency of the Arabian equity market".

But it added that given the size of the market, it would need more feedback from market participants to decide whether to upgrade

"encourages market participants to review these enhancements of the Arabian and to share feedback on the reclassification proposal. will also continue to engage directly with its clients on this topic," it said.

(Reporting by Andrew Torchia; Editing by Stephen Coates)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, January 12 2018. 11:57 IST