Kuwait’s up­grade to MSCI emerg­ing mar­kets in­clu­sion is on track for May 2020

The National - News - - BUSINESS - FA­REED RAH­MAN

The up­grade of Kuwaiti eq­ui­ties to MSCI emerg­ing mar­kets sta­tus is on track and a fi­nal de­ci­sion is ex­pected be­fore the year end, in­vest­ment bank Arqaam Cap­i­tal said.

MSCI, the world’s largest in­dex provider, said in June that it would up­grade Kuwait to EM sta­tus in May 2020, de­pend­ing on fur­ther re­forms, with a fi­nal an­nounce­ment set for

De­cem­ber. “The up­grade to EM sta­tus is con­tin­gent on the im­ple­men­ta­tion of om­nibus ac­count struc­tures and the same Na­tional In­vestor Num­ber cross-trades for in­ter­na­tional in­vestors. The Kuwaiti au­thor­i­ties have un­til the end of next month to im­ple­ment these changes,” Arqaam said in a re­port.

Arqaam ex­pects Kuwait to be in­cluded in the emerg­ing mar­ket in­dex in May, a re­clas­si­fi­ca­tion that could at­tract $2.8 bil­lion (Dh10.28bn) of in­flows from pas­sive funds to its eq­ui­ties mar­ket. Kuwait will be the fourth coun­try from the re­gion af­ter the UAE, Qatar and Saudi Ara­bia to be re­clas­si­fied as an EM by MSCI. It is cur­rently the big­gest mar­ket by cap­i­tal­i­sa­tion in the lower-ranked Fron­tier Mar­ket in­dex, with a weight­ing of above 30 per cent.

Kuwait has a sta­ble econ­omy with a fiscal sur­plus of 6.7 per cent even with oil prices of $60 per bar­rel. Arqaam ex­pects aus­ter­ity mea­sures, like the im­ple­men­ta­tion of VAT and an ex­cise tax, to be de­layed to 2021 or later, and do­mes­tic spend­ing is not ex­pected to pick up due to ten­sions be­tween the coun­try’s par­lia­ment and gov­ern­ment.

In­ter­est rates in the coun­try are likely to fall as the Cen­tral Bank of Kuwait is set to fol­low the US Fed­eral Re­serve in cut­ting rates, the re­port said.

The Kuwait Premier Mar­ket in­dex, made up of the coun­try’s big­gest shares, has been the top per­former of all Ara­bian Gulf mar­kets this year, in­creas­ing in value by 17.2 per cent dur­ing the first nine months, ac­cord­ing to a Kamco Re­search re­port, as ac­tive in­vestors buy stocks ahead of a po­ten­tial up­grade by MSCI.

De­spite this, a hand­ful of at­trac­tive op­por­tu­ni­ties re­main in Kuwaiti eq­ui­ties in­clud­ing Viva, Oore­doo Kuwait, Meezan, Hu­man­soft, Jazeera and Na­tional Bank of Kuwait (NBK), Arqaam’s re­port said.

“We re­main buy­ers of NBK, de­spite al­ready fair val­u­a­tion on in­dex flows, and Hu­man­soft, de­spite neg­a­tive earn­ings sur­prises, both part of the po­ten­tial MSCI EM In­dex,” it said.

“Out­side the stan­dard in­dex we see deeper value, and we rec­om­mend Gulf, Jazeera, Meezan, Oore­doo and Viva, with the lat­ter three hav­ing sub­stan­tial up­side po­ten­tial.”

Arqaam’s note said gross do­mes­tic prod­uct is likely to re­main un­der pres­sure due to the lower oil price and on­go­ing pro­duc­tion cuts. Kuwait’s real GDP ex­panded 0.4 per cent year-on-year in the sec­ond quar­ter of the year.

Newspapers in English

Newspapers from UAE

© PressReader. All rights reserved.