The underlying story is that upgrades to emerging market index status tend to be very bullish for equities, said Charlie Robertson, global chief economist, emerging and frontier markets specialist at London-based Renaissance Capital. “What history tells us that in the 18 months up to an upgrade, stocks do well. If oil and currency stability were the most important issues, Nigeria would have done well too,” Robertson said of the recent run in Saudi performance, where the stock market is still up 16 percent this year, versus a decline of 15 percent in the Nigerian market. “The base case probably remains that the Saudi market still has gains to come.”

Steven Holden, founder of Copley Fund Research, which tracks how fund managers around the world invest, said the passive impact of the Saudi market inclusion into the emerging market indexes is “still a big deal and shouldn’t be underestimated.” He said ownership of Saudi stocks by the actively managed emerging market fund universe his firm tracks will continue to rise, and the current buying is “just the start. It is definitely an index tailwind and provides support to the market.”

Holden said that his firm’s data shows that, on average, 60 percent of fund managers try to match an index weighting to markets, and Saudi Arabia’s weighting presence among global emerging fund managers is currently at 7.2 percent. “No other region the size of Saudi Arabia has anything less than 60 percent of fund ownership, and currently at 7.2 percent, it represents a massive underinvestment,” Holden said. “The Saudi market is guaranteed to attract greater international investment due to its inclusion in the emerging markets index next year.”

He said the index providers, FTSE and MSCI, are in a difficult position, because their entire business is based on an index process driven by a broad methodology. “Countries go in and out of indexes through a methodical process, not on the basis of one political event. That process is fairly well-defined and MSCI and FTSE don’t make decisions lightly and it takes a long time to go through,” Holden said.

“The recent event may have dampened foreign interest in investing in the kingdom, but there is at least a short term tailwind rather than headwind for Saudi stock market,” said Garbis Iradian, chief economist for the MENA region at the Institute of International Finance in Washington D.C. He said it is the more ambitious elements of the Crown Prince’s plan that are most threatened, such as the plan to build a $500 billion megacity (Neom) and the broad objectives set in the Saudi Vision 2030 plan which are “overly” ambitious.

“But that was true before the recent global backlash, and more so due to the challenge of implementing deeper structural reforms to diversify the Saudi economy away from oil and achieve sustained, rapid private sector growth,” Iradian said. “MBS has already consolidated his power and the recent event will not weaken his power unless the U.S. Congress imposes strong sanctions.”

Neom and the creation of a new global financial district were already stalled, and “a failure waiting to happen, a train wreck waiting to happen,” Seznec said. “You can’t have one person from the top dictating everything.” Seznec said it is the “more logical reforms, not the Neom city and stuff,” that need to be the focus and be properly managed.

Some U.S. politicians have been calling for sanctions, but barring a strong and unlikely move against MBS, Iradian said it is going to be his job to convince investors to stick with the kingdom and see through reforms, and he remains highly popular within the country, where he received a standing ovation this past week at the Future Investment Initiative. “MBS has already consolidated his power and the recent event will not weaken his power unless the U.S. Congress imposes strong sanctions. MBS is still very popular among the young Saudi nationals (which account for more than 60 percent of the population) partly due to the social reforms (including more entertainment and letting women drive).”

Seznec is less convinced that MBS will not face any challenge to his power, but he stressed that in phone conversations he has had this week with people in kingdom, there wasn’t much concern shown. “The whole issue is not seen in Saudi Arabia as a major crisis. … People are not about to go out in the street and complain,” he said, though he added that the press is controlled in the country. “The king is very old and knows he has to establish a legacy, and it really is in shambles right now because of this. The U.S. and Europe relationships are in terrible shape, but when you think from a strategic standpoint, the U.S. needs support for the fight against Iran, so can’t just entirely start turning against them.”

The most important commitments for MBS to see through, but which have not been completed, are on a lengthy list of reforms that will be required for private business growth, Iradian said. The Saudi business climate ranking among emerging economies was 90th out of 190 nations, according to a World Bank assessment this year, a weakness which stems from lack of transparency, rule of law, too much red tape, and obstacles in enforcing contracts and resolving insolvency, Iradian said.

Recent statistical measures of the Saudi economic goals are mixed. Fuel subsidies have declined and electricity prices increased by about 45 percent this year, in keeping with plans to make the population less reliant on government subsidies. Government non-oil revenue as percentage of GDP increased to 10 percent in 2017, and should reach 12 percent in 2018, according to Iradian. But the unemployment rate increased in the past two years to around 13 percent as of the second quarter 2018, when the plan is to cut it in half, and despite increased hurdles on employment of foreign labor. Meanwhile, foreign investment is still minimal. The kingdom wants to increase FDI to 5.7 percent in 2030, but it decreased to 0.4 percent of GDP in 2017. And little progress has been made on increasing the contribution of small and medium-sized businesses to the economy.

Many of the companies that are the biggest public companies in Saudi Arabia today, and the ones which are the largest weightings in the stock market, are the older-guard companies in core industries, such as chemicals, materials, telecom and financial services.