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Kuwait stocks could receive $5bn inflows after upgrades

Bader Al-Kharafi hails Boursa’s promotion to MSCI’s emerging markets index from 2020

(Left) Board Member and Head of the Executive Committee of Boursa Kuwait Bader Al-Kharafi, (Center) Minister of Commerce and Industry Khaled Al-Roudhan and (right) Acting CEO of Boursa Kuwait Mohammad Al-Osaimi

KUWAIT: Kuwaiti stocks could attract inflows of as much as $5 billion after a third global index provider upgraded the bourse to an emerging market. Kuwait’s stock exchange, known as Boursa Kuwait, rang the opening bell yesterday after MSCI Inc announced the upgrade, to be implemented in 2020, a move that solidifies Kuwait’s new status as a regional hotspot for market growth.

MSCI decided to upgrade the market to emerging market status, confirmed Othman Al-Issa, Vice Chairman of Kuwait’s Capital Market Authority. Issa noted that the upgrade is the first step towards transforming Kuwait into an international financial and commercial center.
Minister of Commerce and Industry Khaled Al-Roudhan praised the efforts of CMA and Boursa Kuwait. “Kuwait’s upgrade to emerging market status by MSCI is the most important step to transform Kuwait and attract foreign capital. Efforts have resulted in including Kuwait in the top three global indices,” he said.

Kuwait’s stock market joined the FTSE Russell emerging market index last year and this year will be added to S&P Dow Jones Indices’ Global Benchmark Indices with an emerging market classification. MSCI is the world’s largest index provider, whose emerging-market group of indexes has about $1.8 trillion of assets tied to it. MSCI expects Kuwait to introduce more reforms before the end of 2019, such as introducing omnibus accounts that would allow foreign investors to trade while remaining anonymous, offering the same privileges that local investors now have.

Bader Al-Kharafi, Board Member and Chairman of the Executive Committee of Boursa Kuwait, expressed his happiness with MSCI’s decision to upgrade the bourse. “The decision of Morgan Stanley Capital International to promote the Kuwaiti market comes as a culmination of the efforts of the stock exchange team in coordination with the Capital Market Authority and in cooperation with Kuwait Clearing Company,” Kharafi said.

He added that the stock exchange has witnessed a qualitative leap and radical reforms through successful privatization and the transfer of its management to the private sector, which makes it able to cope with the dynamic of continuous development witnessed by international financial markets. Kharafi added that shifting the Kuwaiti bourse from “frontier market” to “emerging market” status would put it under the scope of foreign investments in the near future.

Kharafi praised the support and attention paid by minister Roudhan to the development of the capital market and his efforts to overcome the obstacles that may impede national benefits. He added that Roudhan’s decision to open banks for foreigners had a significant impact on the promotion process. Kharafi thanked the board of financial market commissioners and the technical team of the commission for their active role and the great sense of responsibility towards the development process.

“We are working away from red tape and bureaucracy. We do not have the luxury of time. We have projects and benefits to achieve. We also confirm that the board of directors of the stock exchange has great confidence in the executive management under Mohammed Al-Osaimi and his team who spare no effort to win local, regional and global investor satisfaction,” Kharafi said.

Kharafi praised the stock exchange for earlier joining the FTSE and S&P indices. He called for continuous work to preserve the confidence gained under the unprecedented reforms achieved under the umbrella of the private sector. In addition, he stressed that in cooperation with the clearinghouse, the stock exchange team has sufficient technical capabilities to meet MSCI’s requirements of the omnibus accounts before November, so that the market can be ready for the final decision on Dec 31. Finally, Kharafi pointed out that the bourse is expected to receive inflows of about $2.8 billion in new foreign liquidity by international institutions in May 2020.

Mohammad Al-Osaimi, Acting Chief Executive Officer of 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.” Hamad Al-Humaidhi, Chairman of Boursa Kuwait, said: “The MSCI upgrade will be a game-changer 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.”

Saleh Al-Silmi, Chairman of Kuwait Clearing Company, said Kuwait’s upgrade to emerging markets status prominently places it on the global investment map, and urged all involved parties to commit to the implementation of further reforms in line with international standards in all relevant areas. Khaldoun Al-Tabtibai, KCC CEO said: “KCC played a pivotal role in the reclassification of Kuwait to an emerging market status, which was one of its primary strategic objectives. Accordingly; we invested heavily in market developments, in line with the CMA’s vision; which has now been validated with a series of prominent achievements.”
Muthanna Al-Saleh, Head of Markets Sector at CMA, said: “These upgrades contribute to the national market by attracting more international investments and diversifying investment and job opportunities in Kuwait. The MSCI upgrade paves the way for further coordinated and collective work with market participants, in an effort to further develop the capital markets in line with global standards.”
The Kuwaiti market has outperformed markets in the Middle East this year in anticipation of the MSCI move. The benchmark premier index is up about 20 percent so far this year. MSCI said Kuwait’s plans also included introducing central clearing counterparty and making available stock swaps, stock lending and short-selling facilities.

By Faten Omar

By Faten Omar

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