Some investors remain wary despite the expected upgradeto emerging market status. REUTERS/Faisal Al Nasser
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While tens of billions of dollars stream into Saudi Arabia on a potential MSCI (Modern Index Strategy) Inc. upgrade to emerging market status, it will take more to keep investors enthused.While foreigners currently own only 5 percent of Saudi Arabia's $517 billion stock market, MSCI's endorsement will draw more institutional money from abroad, diversifying the investor base."The issue of corporate governance and transparency exists not only in Saudi Arabia, but also in Vietnam, Africa and other frontier countries," Balk said.And besides, while many Saudi companies are currently dominated by patriarchs or families, they will probably change over time as they engage in conversation with institutional investors and the market matures, said Dugan at Namara Wealth. Saudi stocks have become more expensive at a time when investors are questioning whether the two-year rally in emerging market assets will last. Saudi Arabia's Tadawul All Share Index is trading at 15 times estimated earnings per share for the coming year, versus 12 times for the MSCI Emerging Markets Index.
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