MSCI has added China to its benchmark emerging market indexes overnight

• MSCI has added China to its benchmark emerging market indexes overnight while Saudi Arabia has been included on a watch list for possible inclusion, with a full upgrade potentially going to come sometime in the next 12 months. The achievement by the Kingdom follows years of effort to comply with rigorous investor friendly rules such as facilitating access by foreigners to its market and implementing T+2 settlement rules. It may draw billions of dollars into the Saudi market when it is finally included in the index. It should also help the progress of diversification already underway in Saudi Arabia and put it in a good position to meet many of its 2030 Transformation plans. The inclusion could also have broader positive implications for other regional equity markets, creating greater awareness of the Middle East region in the minds of global investors.   
• In a separate development Saudi Arabia’s King Salman has this morning issued a royal decree replacing Crown Prince Mohammad bin Naif with the Deputy Crown Prince Mohammed bin Salman in a surprise move that puts Mohammed bin Salman as next in line to the throne. There were also a raft of other steps announced including the restoration of benefits for all state employees. 
• In the UK yesterday Bank of England Governor Mark Carney put a more dovish light on the MPC’s recent deliberations, saying that now is not the time to begin raising interest rates. Last week of course the MPC voted 5:3 in favour of keeping rates unchanged at 0.5%, but with 3 members voting in favour of tightening it was thought that a rate hike may not be too far off. Carney however has sought to dampen such speculation, adding that domestic inflation pressures are subdued, and there are mixed signals on consumer spending and investment. In particular he drew a distinction between inflation that it is exchange rate generated and that which is domestically driven. Carney said any rate increases will be limited and gradual and the Bank must see how the economy reacts to the reality of Brexit.

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