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MSCI to include Kuwait in main emerging-markets benchmark in 2020

By Asia Asset Management  
June 27, 2019

Index provider MSCI Inc. will add Kuwait to its main emerging-market stock index in 2020 if the country opens up some trading accounts to foreign institutional investors by the end of this year, a move that could draw billions of dollars into its stock market.

Only local licensed entities are currently allowed to trade using so-called omnibus accounts, while cross trades with the same National Investor Number (NIN) are only available to certain exempt ‘non-discretionary’ local accounts.

The Kuwaiti regulator must open both to international institutional investors before the end of November, MSCI says in a statement on June 26.

Trade transactions in an omnibus account appear under the name of the broker and details of individual investors are kept private. It takes at least two individuals to create an account.

The Capital Market Authority, the Kuwaiti regulator, said on June 12 that it will open up the omnibus account and same NIN cross trades to foreign institutional investors by November.

The plan is part of the Kuwait government’s market development project, which was unveiled in 2017 and is now in its third phase. Changes introduced under the project include short selling, after-hours trading session, and new investment instruments.

According to Sebastien Lieblich, global head of equity solutions and chairman of the MSCI Equity Index Committee, these changes “have significantly increased the accessibility level of the Kuwaiti equity market for international institutional investors”.

“International institutional investors highlighted the criticality of omnibus account structures and same NIN cross trade capabilities to avoid frictions in their investment process. We welcome the Capital Market Authority’s public commitment to deliver these market features by November 2019. We will closely monitor their implementation before making the final decision,” Mr. Lieblich says in the statement.

MSCI will make its final decision on the inclusion by December 31.

A fund manager at a Malaysian asset management firm says Kuwait’s inclusion into the MSCI Emerging Market Index will “attract billions of dollars of inflows into the Kuwaiti stock market”.

“This is a big deal for the Kuwaiti stock market, as it is now the fourth market in the Middle East to be included in the index, after Qatar, Saudi Arabia and United Arab Emirates,” the Kuala Lumpur-based fund manager tells Asia Asset Management, speaking on condition of anonymity.