The chairman of Boursa Kuwait on June 27 described MSCI’s decision to add Kuwait to its main index tracking stocks in emerging markets next year as a “game changer”.
The change will happen in June 2020, the New York-based index compiler said in a statement.The Gulf country, whose $98bn stock market is similar in size to those of New Zealand and Ireland, is currently the biggest member of the MSCI’s main frontier gauge.
Hamad Al-Humaidhi said the reclassification was an “important milestone” and “will bolster the country’s standing on the global investment map”.
“This development will not only provide a boost to our economy but also propel the transformation of the country into a regional and global centre of commerce and finance as envisaged by the Kuwait Vision 2035,” he said.
“The MSCI Emerging Markets upgrade will be a gamechanger for the domestic capital markets as it will lead to substantial inflows of foreign investment, improved liquidity, and a significant enhancement in the investing environment in the country,” he added.
The Gulf country, whose $98 billion stock market is similar in size to those of New Zealand and Ireland, is currently the biggest member of the MSCI’s main frontier gauge.
The reclassification, which is expected to lead to significant foreign capital flows to country’s equities, will take effect in one step coinciding with MSCI’s May 2020 Semi‐Annual Index Review.
The MSCI status upgrade follows Kuwait’s inclusion in S&P Dow Jones Indices’ Global Equity Indices, with Emerging Markets classification in December 2018 and in the FTSE Russell Emerging Markets Index in September 2017.
National Bank of Kuwait SAK, Kuwait Finance House KSCP and Ahli United Bank BSC, which is going through a merger with KFH, are together expected to draw about $1.8bn from passive investors following the upgrade, according to estimates by EFG-Hermes’ Al Hajj.
Mohammad Al-Osaimi, acting CEO, Boursa Kuwait, said: “MSCI’s reclassification of Kuwait to Emerging Markets represents a recognition of the instrumental role Boursa Kuwait played in improving market access and efficiency, enhancing transparency and governance, increasing liquidity and strengthening investor confidence over the last two years.”
As part of its market development plans, Boursa Kuwait has launched several reforms, including a new rulebook, which helped the company to specify new three-tiered market segmentation, consisting of the premier market, the main market, and the auction market.
In addition, the company has introduced the over-the-counter trading platform to enable investors to trade unlisted securities with greater transparency. It also recently launched part 1 of its phase three market development plans, which included the launch of real estate investment trusts (REITs), tender offers, trade at last and stock swaps, with plans to introduce further services and tools over the coming months.
This edited article first appeared in Arabian Business.