Kuwait Exchange Sees $2.8 Billion of Inflows on MSCI Upgrade

(Bloomberg) -- MSCI Inc. will probably upgrade Kuwaiti equities to its main emerging-market index this week, which could trigger $2.8 billion of inflows from passive funds, according to the head of the nation’s stock exchange.

“We have ticked all the boxes that are required by MSCI,” Mohammad Al-Osaimi, the acting chief executive officer of Boursa Kuwait, said in an interview on Sunday. “We have also offered international investors additional services and products they were looking for and some changes in bylaws they requested. We have touched base with them on our roadshows. We saw a comfortable response.”

The New York-based index compiler, whose emerging-market group of indexes has about $1.8 trillion of assets tied to it, will announce on June 25 whether it’s lifting the country from its current frontier classification. The decision will become public shortly after 10:30 p.m. Central European Summer Time.

This is significant for the small Gulf nation and its $98 billion stock market, which is similar in size to those of Ireland and New Zealand. Local authorities have been tying to modernize trading infrastructure and attract foreign investors in the past few years. The exchange was upgraded by FTSE Russell less than one year ago. The main Kuwaiti index rose 0.4% on Monday, extending its gain this year to 21%.

Kuwait’s reforms include segregating stocks based on size and liquidity, and separating shares that hardly trade in comparison to the biggest and most liquid names, primarily banks.

In neighbor Saudi Arabia, MSCI’s inclusion of shares in the emerging-market gauge is expected to lead to about $11 billion of inflows once fully implemented, according to estimates by the Saudi stock exchange.

Aiming to lure active fund managers that would look beyond the benchmarks, Al-Osaimi said the bourse is working with the markets regulator to ensure companies trading in the premier market have investor-relations departments. It may be made obligatory by next year, he said.

More from the interview:

• An initial public offering of the stock exchange could happen this year or the beginning of 2020.
• Two or three IPOs are expected in the next 12 months.
• Exchange’s new board is aiming to attract local petrochemical companies to list.
• Short-selling will be introduced “in the upcoming days,” and will be followed by stock lending and borrowing.
• Bourse aims to introduce margin trading by the end of the year.

To contact the reporters on this story: Filipe Pacheco in Dubai at fpacheco4@bloomberg.net;Fiona MacDonald in Kuwait at fmacdonald4@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Paul Wallace, Paul Jarvis

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