EFTA00793992.pdf

Deutsche Bank Markets Research VA Middle East Saudi Arabia Sti Date 29 March 2018 Saudi Arabia Strategy Update Saudi Arabia included in FTSE Secondary EM Index Aleksandar Stojanovski Saudi Arabia expected to weigh —3% in the index, inflows of up to -USD4.5bn expected Research Analyst FTSE announced that Saudi Arabia would be promoted to Secondary Emerging +971-4-361-1786 market status in five tranches, from Mar-2019 to Dec-2019. It expects Saudi Arabia to have an index weight within FTSE GEIS of 0.25% and 2.7% within the FTSE Emerging index. Saudi Arabia could be the 10th largest constituent on the EM Index with an expected weightage of 3% as per the data suggested by FTSE Emerging Saudi Arabia Inclusion Index; at current market prices this could translate into USD4.5bn of inflows into the Saudi Equity market. The FTSE Saudi Arabia All Cap Index has 79 constituents and the large cap stocks are likely to attract bulk of the expected inflows; we estimate Sabic could attract some USD727m in inflows; Al Rajhi USD504m, NCB USD385m. Figure 1:FTSE Saudi Arabia stocks : potential flows of USD4.5bn MyMeow Ne merles:op Expected ME Funds Sow Coessituent Sector IUSD ha) !USD bat EM weight (LISO ml Sun Basic ininulas Corp Chemicals 94 0.589E 727 Al Pee% Donkey & lineament Corp Banta 33 OSI% 604 Naia:nal Commettial Boni, 5150 BAAL. 35 026% 385 San Telecom Co Tek.cornmaceimns 46 016% 239 Samba Rouncial Dray BAAL. 15 0-15% 222 San Asabon Mang CoaleeSta Mang I? 012% 100 Moveal Co Lid Food Ptocluows IS 912% 150 Brod Sent Banta 11 011% I70 Sad Elemiciry CO Elaeuldry 23 909% 137 Salmis, Bonk BAAL. B 908% 125 Other's 213 63 1.10% 1.664 Total BOB Ib 3.02% ASS Sower Owen?. Sink Fn(. &bombe. Haw. LP Deutsche Bank AG/London Distributed on: 29/03/2018 03:12:07 GMT Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017. EFTA00793992 29 March 2018 Saudi Arabia Figure 2: Expected weight of Saudi Arabia on the FTSE Secondary EM index 30.0% 28.0% 25.0% 20.0% 15.0% 13.3% 11.3% 12.1% I% 9.1% 7.9% 4.3% 3.5% i i • • 1 15.0% 5.0% 32% .3.0% 0.0% I I I I China Taiwan Inds Otani South Russia Memo Thatand Malays., Saud. OaMn Alma Arabia SOW* Guam** &Mk FTSE. BAMM000,1 Atom LP FTSE inclusion done; MSCI EM decision to be announced in June Saudi Arabia is also nominated for inclusion in the widely tracked MSCI EM Index, with a decision on inclusion to be announced in June '18. A favorable decision could translate into some USD39bn in inflows, with actual inclusion expected for June '19. For more details on Saudi inclusion into MSCI EM please refer our strategy report dated 20-Feb-11. It is interesting to observe that Saudi Arabia has already witnessed foreign fund inflows of USD619m in Jan'18 - the highest inflows on record - followed by USD364m in Feb'18. The inclusion by FTSE and the impending decision by MSCI could mark the start of a sustained period of higher inflows into Saudi equities, in our view. Page 2 Deutsche Bank AG/London EFTA00793993 29 March 2018 Saudi Arabia Appendix 1 Important Disclosures •Other information available upon request •Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at Aside from within this report, important risk and conflict disclosures can also be found at topicld=RB0002. Investors are strongly encouraged to review this information before investing. Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Aleksandar Stojanovski Equity Rating Key Equity rating dispersion and banking relationships Buy: Based on a current 12- month view of total share-holder NW return (TSR = percentage change in share price from current price to projected target price plus pro-jetted dividend yield ) , 1 we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock. Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Newly issued research recommendations and target prices supersede previously published research. 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