Kuwait: Ready for a FTSE upgrade?
Kuwait: September 5, 2017
The Kuwaiti market has been out of favor with investors for a few years with underperformance and low levels of liquidity. It wasn’t until late 2016 that the market started to attract interest and witnessed a significant pick up in performance while liquidity came back strongly
HIGHLIGHTS
- Kuwait seems to be on track to be classified as a Secondary Emerging Market by FTSE Russell by the end of September 2017. The timeline and the mechanism of the actual inclusion, however, is still unclear.
- Expectations at this point is that after the formal announcement in September 2017, and due to liquidity constraints, the inclusion will follow a phased approach with 50% of the weight included in September 2018 and 50% in March 2019.
- FTSE follows a well-documented, standard methodology for country classification. After adjusting the settlement and clearing cycle back in May 2017, Kuwait seems to have satisfied all the technical requirements to be classified as a Secondary Emerging Market. Such changes, however, still need to be reviewed and approved by FTSE.
- Even though the actual inclusion would most likely happen a full year after a favorable outcome of the September 2017 meeting, the announcement in itself would constitute a positive catalyst for the local market.
- Following previous instances of country upgrades, we would expect a run-up in the market around the announcement period and in the months leading up to the effective date(s) of the inclusion.
