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Delayed MSCI Kuwait Inclusion Provides Opportunity for Investors | KUW8

  • MSCI had delayed the inclusion of Kuwait to the Emerging Market Index Series until November 2020 
  • Low oil prices and undervalued Kuwaiti equities providing a unique buying opportunity
  • KUW8 UCITS ETF provides focused exposure to Kuwaiti securities across industry sectors

 

Index provider, MSCI has confirmed in its most recent country classification review that Kuwait will be upgraded to ‘emerging market’ status and added to the leading MSCI Emerging market index suite in November, 2020, following the introduction of omnibus account structures in the gulf state.

Kuwait is expected to have an initial index weight of ~0.69% which, in turn, is expected to drive up to $10 Billion of active and passive flows into companies listed on Borsa Kuwait [1]. 

Historically, the upgrade of a country, and its inclusion in a major benchmark has had a positive price impact on the underlying securities.

Looking at Saudi Arabia as a case study, the market showed discernible positive price impacts on both the announcement of the inclusion as well as on implementation. Using the comparison, Kuwait might experience a large performance boost in the second half of 2020 due to buy side pressure in view of the MSCI implementation.

Additionally, Kuwaiti policy makers, like many of their regional peers, are responding to an age of declining energy prices and decarbonization by implementing a wide-ranging economic development and infrastructure plan – ‘Vision 2030’. The plan is designed to transform the Kuwaiti economy through more than 150 strategic programmes ranging from public administration reform, education, technology, sustainable energy, urban development, healthcare and tourism.

The combination of low energy prices, the economic development projects and the potential impact of the index upgrade are creating a once-in-a lifetime buying opportunity for investors who want to access the long-term growth potential of the Kuwaiti economy.

Investing in Kuwait

When you trade ETFs your capital is at risk.

The KMEFIC FTSE Kuwait Equity UCITS ETF (KUW8) was the first UCITS ETF to provide targeted exposure to Kuwaiti securities. It is also the only UCITS ETF to be sponsored by a Kuwait asset manager, (Kuwait & Middle East Financial Investment Company).

Priced at 80bps, KUW8 includes 17 of the largest and most liquid securities trading on Borsa Kuwait and uniquely is focused away from the declining energy sector and towards sectors that stand to benefit most from ‘Vision 2030’ spending.

As such, KUW8 offers investors an efficient, liquid and diversified tool for investors who want to benefit from the potential impact of the upgrade.

For more information on the ETF, visit the KMEFIC FTSE Kuwait Equity ETF (KUW8) fund page.

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