In a landmark development that comes as a global recognition for Boursa Kuwait, the Capital Market Authority (CMA) and the Kuwait Clearing Company’s (KCC) sweeping market development efforts, MSCI Inc., a leading provider of critical decision support tools and services for the global investment community, today announced the reclassification of Kuwait to ‘Emerging Market’ from its previous ‘Frontier Market’ status in its 2019 Annual Market Classification Review. The reclassification is subject to omnibus account structures and same National Investor Number (NIN) cross trades being made available for international institutional investors before the end of November 2019.
The reclassification, which is expected to lead to significant foreign capital flows to country’s equities, will take effect in one step coinciding with MSCI’s May 2020 Semi‐Annual Index Review. This would lead to an inclusion of nine stocks in the MSCI Emerging Market Index having a pro forma index weight of approximately 0.5%.
The MSCI status upgrade follows Kuwait’s inclusion in S&P Dow Jones Indices’ (S&P DJI), Global Equity Indices, with Emerging Markets classification in December 2018 and in the FTSE Russell Emerging Markets Index in September 2017.
The global index compiler’s decision to include Kuwait in its Emerging Markets benchmarks comes in response to the country results in the 2019 Annual Market Classification Review. Announcing the reclassification, MSCI noted that Kuwait’s Market Development Project has set the path for the seamless implementation of numerous regulatory and operational enhancements in the Kuwaiti equity market. These enhancements have significantly increased the accessibility level of the Kuwaiti equity market for international institutional investors and resulted in broad positive feedback from these investors on the MSCI reclassification proposal.
As part of its market development plans, Boursa Kuwait has launched several far-reaching market reforms, including a new rulebook, which helped the company to specify new three-tiered market segmentation, consisting of the premier market, the main market, and the auction market. In addition, the company has introduced the Over-the-Counter (OTC) trading platform to enable investors to trade unlisted securities with greater transparency. Furthermore, it has recently launched part 1 of its Phase Three market development plans, which included the launch of Real Estate Investment Trusts (REITs), Tender Offers, Trade at Last and Stock Swaps, with plans to introduce further services and tools over the coming months.
Over the past few years, KCC in collaboration with Boursa Kuwait and the CMA, took on a leading role in applying numerous changes in relation to post trading systems, such as adjusting the settlement period to T+3, adopting the DvP principle and introducing Custodian Rejection. KCC also took the initiative to apply a new mechanism that allows for the execution of decisions taken at general assemblies, according to international standards of the same. Moreover; KCC has also facilitated the account opening process for foreign custodians, and has also reduced the accompanied documentary collection requirement, to support the Kuwait Capital Market position as an attractive investment platform.