Move would take Kuwaiti stocks from an unclassified status to one of a secondary emerging market
Kuwait’s stock exchange has met all the requirements necessary for the country to be added to the emerging markets list compiled by index provider FTSE Russell later this week, according to its chief executive officer.
Kuwait is in line to join Gulf neighbours including Saudi Arabia and the United Arab Emirates in an inclusion that could boost inflows into its equity market by millions of dollars. FTSE Russell is expected to announce its country classification annual review on Friday after markets close in the US. The addition would take Kuwaiti stocks from an unclassified status to one of a secondary emerging market.
“We are optimistic,” Khaled AbdulRazzaq AlKhaled, CEO of Boursa Kuwait, said in an interview in Kuwait City on Tuesday. “I think we have covered the FTSE requirements, all of them. Based on my info, the decision makers are happy with what we have achieved.”
If Kuwait joins the FTSE’s emerging markets list as expected, a similar addition by MSCI Inc. could happen “in the next one or two years,” he said.
Kuwait’s main equity index has rallied 18 percent this year, the best performance among major Gulf markets, helped by speculation it will join the FTSE list. The inclusion could attract about $822 million in flows from passive funds tracking the index, according to calculations by the research arm of investment bank EFG-Hermes Holding. The country’s equities may represent around 0.5 percent of the index, according to strategist Mohamad Al Hajj.
As part of a broad initiative to improve liquidity in stock trading, the bourse is planning to introduce central counter-party settlement by the end of next year, AlKhaled said. Derivative products should follow, he added.
The stock exchange also plans to create three regulated market segments. A premier market will have certain requirements of corporate governance, liquidity and capital, and should include the country’s blue-chip names.
A second will aggregate companies with shares complying with “a certain liquidity formula,” AlKhaled said, and the third segment will gather the less liquid stocks. The timing of the implementation will depend on the country’s Capital Markets Authority.
Boursa Kuwait also plans to announce a new main stock benchmark to replace the existing one, once such markets are implemented, AlKhaled said.