The inclusion brought Saudi's share to 2.8% of the index's total market capitalization. However, the event failed to provide upward momentum for the Saudi stocks as receding fund inflows rattled investor confidence.
The Saudi Arabia index fell 1.9%, touching its lowest level since January, with all of its banks dropping. Al Rajhi Bank shed 3.4% and Samba Financial Group plunged 4.2%. A Reuters poll found 60% of fund mangers said they would decrease their investments in Saudi Arabia, displaying bearishness that has carried over from last month.
Investment bank EFG Hermes said in a note on Wednesday that the investment case for Saudi banks is no longer "compelling" in their view on the backdrop of receding passive flows, rates becoming a headwind, and the emergence of credit quality concerns. Qatar's index closed 2.1% higher with most of its blue-chip stocks gaining. Qatar National Bank, the Middle East and Africa's largest lender, rose 3.4% and Industries Qatar was up 2.7%.
Egypt's blue-chip index closed 1.6% higher, reaching its highest level since May, with country's largest lender Commercial International Bank rising 2.9% and Egypt Kuwait Holding closing 3.1% higher.
Middle Eastern funds plan to increase their investments in Egypt, according to the Reuters poll.
Earlier this month, Egypt reported its lowest headline inflation rate in nearly four years, and its central bank cut interest rates by 150 basis points.
Egypt's index is up 13.8% so far this year, beating most regional markets.
Back in the Gulf, the Abu Dhabi index gained 0.7% with Emirates Telecommunications adding 1.6% and Abu Dhabi Commercial Bank advanced 3.5%.
Some 50% of fund managers polled said they would increase their investments in the United Arab Emirates, a trend that has continued through most of the year. However, economists polled by Reuters revised their growth expectations down by 0.8 percentage points to 2.2% for the UAE through to 2021. In Dubai, the index traded flat as Dubai Islamic Bank increased 0.8%.