MAR­KETS Kuwait set for in­flows of $7.5bn from up­grade

The National - News - - BUSINESS - THE NA­TIONAL

The up­grade of Kuwaiti eq­ui­ties to MSCI emerg­ing mar­kets sta­tus in 2020 is ex­pected to at­tract an es­ti­mated $7.5 bil­lion (Dh27.5bn) of in­flows from ac­tive in­vestors, ac­cord­ing to a com­pany that spe­cialises in ex­change-traded funds.

Al­lo­ca­tions from ac­tive in­vestors in the months lead­ing up the re­clas­si­fi­ca­tion an­nounce­ment could give the Kuwaiti stock mar­ket an ad­di­tional per­for­mance boost in the first half of next year, sim­i­lar to Saudi Ara­bia’s ex­pe­ri­ence ahead of its up­grade in May this year, ac­cord­ing to HANetf, an in­de­pen­dent ETF spe­cial­ist.

“Look­ing at Saudi Ara­bia as a case study, the mar­ket showed dis­cernible pos­i­tive price im­pacts both in an­tic­i­pa­tion of the re­clas­si­fi­ca­tion an­nounce­ment as well as dur­ing the months lead­ing up to the im­ple­men­ta­tion,” the report said. “Kuwait might ex­pe­ri­ence a sim­i­lar per­for­mance boost in the first half of 2020 due to the ... buy-side pres­sure prompted by the MSCI im­ple­men­ta­tion.”

The ex­pected $7.5bn from ac­tive in­vestors will be in ad­di­tion to an es­ti­mated $2.6bn to $3bn of pas­sive in­flows forecast by Borsa Kuwait. Kuwait is ex­pected to be up­graded to emerg­ing mar­kets sta­tus by MSCI dur­ing its May 2020 semi-an­nual re­view.

Kuwait is the big­gest mar­ket by cap­i­tal­i­sa­tion in the lower-ranked Fron­tier Mar­kets In­dex, with a weight­ing of above 30 per cent. If up­graded, it will be the fourth coun­try from the re­gion in the emerg­ing mar­kets in­dex af­ter the UAE, Qatar and Saudi Ara­bia.

When the UAE went through its own up­grade process in 2013, it reg­is­tered a sig­nif­i­cant eq­uity price rise ahead of the im­ple­men­ta­tion, with the mar­ket ris­ing 44 per cent.

In Saudi Ara­bia, as­set flows into ex­change-traded funds also rose be­fore the mar­ket up­grade, and a sim­i­lar pat­tern is ex­pected in Kuwait, ac­cord­ing to HANetf.

“Con­sid­er­ing that as­sets in Kuwait ETFs cur­rently stand at $90 mil­lion, there seems con­sid­er­able room to grow, fur­ther sup­port­ing Kuwaiti stock prices,” 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 and one of the best per­form­ers glob­ally. It gained in value by 5 per cent in Novem­ber, bring­ing the in­dex’s to­tal in­crease for the first 11 months of the year to 23.8 per cent, ac­cord­ing to a Kamco Re­search report, as ac­tive in­vestors buy stocks ahead of the po­ten­tial MSCI up­grade.

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