“Speculation about Saudi Arabia’s potential inclusion in the FTSE Russell and MSCI emerging-markets indexes, expectations of an initial public offering from Aramco and rising oil prices are all boosting flows into Saudi equities, according to Andrey Glukhov, a money manager at TCW Group,” according to Bloomberg.
Currently, index provider MSCI does not even classify Saudi Arabia as a frontier market, however it is a member of the MSCI GCC Countries Index, according to MSCI. The country has taken steps to liberalize its markets and make them more accessible to foreign investors in an effort to potentially draw the favor of index providers.
Emerging markets are enjoying improved fundamentals thanks to corporate earnings improving as economic growth rebounds and strengthening currencies against the U.S. dollar on the back of improved economic outlooks. Investors would do well to not simply focus on the weak dollar or supposedly compelling valuations on emerging markets stocks.
For more information on the developing economies, visit our emerging markets category.