Boursa Kuwait achieves historic milestone with MSCI upgrade – Roudhan: KD 1 billion inflow...

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Kuwait - Yasmine El Tohamy - Minister of Commerce and Industry Khaled Al-Roudhan

By Nawara Fattahova

KUWAIT: Boursa Kuwait achieved another historic landmark yesterday when MSCI announced it will be upgrading the exchange to emerging market status as part of its May 2020 Semi-Annual Index Review in one step, as the Kuwaiti equity market now meets all the necessary requirements.

MSCI Inc is one of the world’s largest index providers, and its plan to upgrade follows upgrades of Boursa Kuwait by FTSE in two phases in 2017 and S&P Dow Jones in 2018. The reclassification is expected to generate billions of dollars in inflows to the market, primarily from large institutional investors following the index.

Kuwait’s bourse will be included in the MSCI Emerging Markets Index with an estimated weight of 0.69 percent, according to Sebastien Lieblich, Global Head of Index Solutions and Chairman of the MSCI equity index committee. Inclusion may also generate up to $7 billion in interest from active investors, according to the Kuwait and Middle East Financial Investment Company (KMEFIC), an asset management firm.

Minister of Commerce and Industry Khaled Al-Roudhan praised the great efforts of all those who made this reclassification possible. “This reclassifying will bring over KD 1 billion to the Kuwaiti market. Although the Capital Markets Authority is very young – it’s the youngest in the region – yet they succeeded in upgrading the market to the top three indexes. In 2017, we started with the FTSE index, followed by S&P Dow Jones Indices last year, and today, after just one year, we upgraded to MSCI. This was a great challenge but the CMA achieved it,” added Roudhan.

Ahmad Al-Melhem, CMA Chairman and Managing Director, said this is the third upgrade for Kuwait and is the most important, as MSCI is the world’s top equity index provider. “The value of the capital that will enter the stock exchange is huge compared to the previous upgrades. The passive investment of MSCI is $1.8 trillion, and for emerging markets it’s $500 billion according to Kuwait’s weight of 0.69 percent. In May 2020, the Kuwaiti market will receive as one tranche a capital of $3.5 billion, and the market is ready for this money flow,” he explained.

“This upgrade is not an upgrade of the Kuwaiti stock exchange, but it is an upgrade for Kuwait in general. This means if another stock exchange is established in the future, it will be classified as an emerging and not a frontier market. It’s important that this upgrade was due to regulations prepared by CMA along with its strategic partners. Also, stricter rules were applied in Kuwait compared to neighboring countries by setting two unexpected conditions – this made Kuwait closer to an evolving emerging market according to the FTSE index. This is the next step that CMA is working on with its partners,” Melhem added.

“I would like to mention another important achievement of CMA this year, which is first total and complete privatization of a public institution (Boursa Kuwait). The shares were transferred to the underwriters, who received the surplus funds as well. This was an unprecedented event in Kuwait’s history,” he added.

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