Saudi Arabia is known for being the largest, most liquid, and least accessible market in the Arab world. Monday Saudi Arabia's Capital Market Authority (CMA) signed an agreement that would allow index compiler MSCI Inc (NYSE: MSCI) to use stock market data to create and issue indexes on the kingdom's equity markets. This agreement will go a long way toward Saudi Arabia attaining MSCI Frontier or Emerging Market status. It will also open the kingdom up to global trade. Currently there is a widespread dominance of local investors. The MSCI Saudi Arabia Domestic Indices, and related regional indices, will be available come June 2012. The reintroduced Saudi Arabia Domestic Indices will include large cap, mid cap, and small cap indices aimed at institutional investors who aren't constrained by foreign ownership requirements.
Saudi Arabia could be hit or miss for emerging market investors. The country’s main strengths can easily be converted into weaknesses. Gaining direct exposure to the potential is a challenge for individual investors. Most investment opportunities come in the form of foreign direct investment. There is currently no ETF available with direct exposure to Saudi Arabia. There are the standard Middle Eastern ETFs such as the WisdomTree Middle East Dividend (GULF) and the Market Vectors Gulf States Index (MES), but even these provide very little exposure to the kingdom. A pegged ETF would go a long way toward providing leverage and exposure to the region for individual investors.