Interview: Is China's Delay Good for Saudi's MSCI Inclusion?

Video: Is China's Delay Good for Saudi's MSCI Inclusion?

Bloomberg TV, 15 June 2016

Mohammed Ali Yasin, Head of NBAD Securities, discusses effects of MSCI denying China's entry into their Emerging markets index, how Brexit fears are impacting markets in the Middle East and the slide in oil prices. He speaks to Manus Cranny on "Bloomberg Markets Middle East"

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Interview - Video Transcript

Bloomberg: The Chinese have just been pushed away by the MSCI, but with some relief I think. I read the transcript for the Tadawul and what happens next for Saudi Arabia. What is your interpretation of this shuffling of the deck?

Mohammed Ali Yasin: I think that China will now have to wait for an inclusion - if any - until probably 2018. It also means the same thing for the Saudis: an inclusion is not going to happen now in 2017, although they are moving in the right direction. It reminds us a bit of the days when the UAE markets and Qatar were actually working to become part of this index and how things were taking a bit longer than usual.
The fact that the Chinese A shares have not been included is probably better for the UAE and Qatar markets because if they had gone in, the weightage of these countries would have been less in that index, and that would have meant more outflows similar to the ones we have seen at the end of May – although it was below 1%.

The other global story that has a regional impact is of course the pound. What is the chatter in the region about Brexit? What is the most important aspect of Brexit for you locally?
That’s what a lot of investors today are not certain about. They don’t know what exactly it is and therefore they have decided to stay out of the market. That has reflected into low trading volumes. I think the effect of that will be substantial on our markets especially if the Leave campaign wins because that is going to mean an expected drop in the pound which then means high volatility in currencies in general - probably the euro. That will immediately touch all asset classes we know, in terms of rebalancing.
Also expectations for the oil to go down might be another 7 to 10% if the Leave campaign wins at least on the short term. That of course will have a negative effect on our sentiment.

Concerning oil, is there some kind of overreaction? We are really struggling to move higher. Have we capped out at 50 dollars?
I would say it all depends on what will happen on the 23rd. I think that because today everybody is being negative, if on the 23rd the Stay wins, we are going to have a positive uptick on all markets. All the fear that has accumulated over the last five sessions, and going on to the coming 9 days, will probably be reacted. So we may go try an test again the 54 technical price in dollar if the campaign stays there. If we don’t, we may test the downside of maybe the 42, and that could be a bit more negative on our markets.