From: Paul Barrett

From: Paul Barrett To: Jeffrey E. <jeevacation(kgmail.com> CC: Richard Kahn - ME> Subject: Saudi Date: Mon, 23 Jul 2018 03:45:29 +0000 Inline-Images: image004.Jpg; image007.jpg: image008.jpg Jeffrey Do you have any strong opinions on the Saudi stock market? Here is a summary of what changes are coming. 1. On June 20th, MSCI included the MSCI Saudi Arabia Index in the MSCI Emerging Markets Index, representing approximately 2.6% of the MSCI EM Index with 32 securities. The first inclusion will coincide with the May 2019 Semi-Annual Index Review and the second step in August 2019. 2. Foreign ownership of Saudi equities (as a proportion of total market cap) is extremely low, at just 1.9%. In contrast, other more mature EM markets such as South Africa and Russia have —40% and —45% foreign ownership respectively. The Saudi market's foreign participation level is also surpassed by Dubai (16%) and Qatar (19%) which were included in the indices in 2014. 3. Currently there is $350b1n of passive and $1.3Trn of active money following MSCI EM Index products. Bank of America estimates the inclusion would ultimately result in —$20bIn of inflows going into 32 securities with a combined current market cap of $140Bln. This results in anywhere between 2 and 200 days of buying based on current liquidity of the underlying stocks (weighted average >60 days) 4. A Saudi Aramco IPO would result in a 4.5% weighting in the EM Index. 5. The chart below tells the story of just how under-owned Saudi currently is. 6. Index trading around 14.5x PIE (banks and petrochems account for around 70% of index) One could buy the US listed ETF (which is up 24% YTD and 5% since the June inclusion) or ask DB if we can do a total return swap on the 32 names. You know this place better than most. What do you think? EFTA01004887 R Paul Barrett Alpha Group Capital LLC 142 W 57th Street, 11th Floor, New York, NY 10019 646-876-5277 (o) 646-342-6930 (c) ;.,' EFTA01004888