Middle East investing moves into the mainstream
The elevation of the Kuwaiti stock market from frontier to emerging market status is the latest sign that the region is moving steadily towards the mainstream in investment terms.
Index providers FTSE Russell and MSCI both welcomed Saudi Arabia to the emerging markets club earlier this year in a move which should increase the flow of capital into the country after the UAE arguably paved the way for some of its Gulf neighbours back in 2010.
This follows several years of work to bring the way these markets operate up to speed with the standards seen elsewhere.
Although there has been some volatility in the intervening period, the benchmark Taduwal All-Share Index is up 14% since FTSE Russell explicitly earmarked Saudi Arabia for promotion at the end of March 2018. That is a better performance than the UK’s FTSE All-Share index, up less than 12%.
The MSCI Taduwal 30 index provides a good snapshot of the market and although the oil industry dominates the Saudi economy, the list of top constituents includes several financial stocks. In total financial companies account for more than 50% of the index.
The elephant in the room is the state-owned oil firm Saudi Aramco with continuing questions over when or if a long-mooted stock market flotation might happen.
We recently saw Middle East-focused Network International (NETW) join the London Stock Exchange and the payment services business has enjoyed a strong start to life as a public company.
For Kuwait the transition to emerging markets status should finally complete in May 2020 with the country planning further improvements to its equity market infrastructure in the interim.