MSCI Inc will probably upgrade Kuwaiti equities to its main emerging-market index this week, which could trigger $2.8bn 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 $1.8tn of assets tied to it, will announce today whether it’s lifting the country from its current frontier classification. The decision will become public shortly after 10.30pm Central European Summer Time.
This is significant for the Gulf nation and its $98bn stock market, which is similar in size to those of Ireland and New Zealand. Local authorities have been trying to modernise 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% yesterday, 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.
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.
An initial public offering of the stock exchange could happen this year or the beginning of 2020 and two or three IPOs are expected in the next 12 months, al-Osaimi said. The 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. The bourse aims to introduce margin trading by the end of the year, al-Osaimi said.