Kuwait: September 30, 2018
NBK analyses Kuwait’s upgrade, inclusion in FTSE Russell index
Dr Husayn Shahrur, Managing Director of the MENA Asset Management Division at NBK Capital, presented on Kuwait’s upgrade and subsequent inclusion to FTSE Russell’s emerging market index. His presentation focused on three main areas:
Passive investing theme – Dr Husayn, spoke at length on the recent trend in preference for passive investing among investors and shared an insightful analysis on the increasing popularity of passive investment strategies in developed markets as seen in trend in asset flows across the globe. The ongoing trend in passive investing supports the growing importance of globally followed benchmarks like MSCI Emerging Market index and FTSE Russell Emerging Market index, which track sizeable assets across emerging equity markets. He emphasized that Kuwait, a FTSE Russell Emerging Market constituent and a potential entrant in MSCI EM index, is likely to be immensely benefit in terms of notable flows going forward thus paving way for greater foreign participation.
Index Classification – He further presented on the major global index providers / indices that play a critical role in shaping and influencing investment strategies globally. He also discussed the rationale behind country classification, delved deep into developed, emerging and frontier countries as classified by MSCI and FTSE, and provided an insight on the constituents of the emerging market indices.
Kuwait’s upgrade to emerging market status and its implications going forward – Dr. Husayn also spoke on Kuwait’s recent upgrade to emerging market status and its implications for the local stock market going forward. He highlighted how the recently announced upgrade and subsequent inclusion to FTSE Russell’s emerging market index is likely to be an important development for the country’s stock market in more than one way. Dr. Husayn expects that the FTSE upgrade will likely lead to overall improvement in the investing environment in Kuwait through increased presence of institutional investors. This could in turn result in multiple positives – positive market sentiments, improved liquidity, increased transparency/governance, increased number of IPOs / equity issuances, increased focus on improving shareholder’s returns, lower cost of capital due to lower equity risk premium, increased market sophistication by introduction of derivatives and similar hedging tools etc.
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