Mubasher: The inclusion of Kuwaiti equities to the emerging market index of global index provider MSCI as from May 2020 will result in passive inflows of nearly $3.1 billion and a much bigger pool of active inflows, as per projected by KAMCO's research arm.
MSCI, formerly known as Morgan Stanley Capital International & MSCI Barra, reclassified Boursa Kuwait from frontier to emerging market, after the latest regulatory and operational enhancements introduced to the Kuwaiti market.
While further details on the implementation of the upgrade would be announced at the beginning of next year, KAMCO Research’s report expected seven stocks, including National Bank of Kuwait (NBK), Kuwait Finance House (KFH), Agility and Boubyan Bank, would form a part of the Standard Emerging Market Stocks.
Kuwait will have a 0.69% weight in the MSCI Emerging Market index, which came marginally higher than the company’s estimates.
“The upgrade would make Kuwait a part of a much larger universe, which according to Bloomberg is around $14 trillion for the MSCI Emerging Market Indices as against a much smaller MSCI Frontier Markets index assets of around $324 billion,” KAMCO said.
Expectations were reflected in the recent trading activity in Boursa Kuwait, mainly in its Premier Market index, which saw a year-to-date return of 30%, the biggest returns in the GCC and one of the largest around the world.
Furthermore, trading activity on the Kuwaiti stock exchange saw a major growth last year and this year.
Total value traded amounted to KWD 4.1 billion last year, with a volume of 21.7 billion shares, while total value traded so far hit KWD 7.6 billion, with 37.6 billion shares, according to KAMCO.
The nine stocks to be included in the Emerging Markets hit beyond the levels over the past decade, when compared with this year, on an annualised basis.
Amid the anticipation of the MSCI upgrade, investors’ focus was directed to the Premier Market stocks, which is manifested in the difference between returns of the index’s year-to-date rate of 30% and Kuwaiti Main Market index’s 2.2%.
While the Premier stocks represented 81% or KWD 6.2 billion of trades since the beginning of 2019, KAMCO expected that investors would turn more to fundamentally sound stocks in the Main Market, after the upgrade.
