In September 2017, FTSE reclassified Kuwait as a secondary emerging market (EM). This kicked off Kuwait’s journey towards ascending to EM status. In another step towards achieving full EM status, S&P Dow Jones announced that Kuwait’s stock market will be added to its Global Benchmark Indices with an EM classification, a move that would be effective this September. Finally, a potential upgrade to EM status by MSCI is in the cards and will cement Kuwait’s EM status.
The upgrade in status will lead to an improvement in market dynamics and the resulting passive inflows of $2.8 billion (Dh10.2bn) will undoubtedly be a boon, making it a highly anticipated event.
Analysts expect passive inflows of around $2.8bn in case of an MSCI EM upgrade, significantly higher than the $950 million or so of passive inflows from the FTSE EM upgrade. Foreign passive inflows usually hit the market around the implementation date, though, going by previous similar events, prepositioning by some active investors in the market happens before the upgrade announcement and implementation dates.
Additionally, on top of the $500bn or so of passive funds tracking the MSCI EM indices, they are used by actively managed funds with more than $1.5 trillion in assets, which could lead to sizable active inflows as well. Unlike the passive flows, which are more or less automatic, the magnitude of the active foreign flows will depend on the attractiveness of the Kuwaiti market and the companies in an EM context. As such, liquidity, valuation, earnings growth, transparency, corporate governance practices will all be factors that will affect which companies will attract active investors. It is this incentive that will help the market improve over time.
The impact of the MSCI upgrade process on the market so far this year has been easily felt, and could continue to affect the bourse in the period leading to the implementation and potentially beyond. The Kuwaiti market has traded in excess of $10.5bn in the first five months of the year, which is a 170 per cent increase over the same period last year. Net foreign flows grew significantly this year to $1bn. Even adjusted for the $300m or so of passive inflows triggered by the increase in the foreign ownership limit for the banks in March, this remains the highest net foreign inflow figure on record. On performance, Kuwait continues its strong performance year-to-date and the MSCI Kuwait index is up 24 per cent. This compares to 16 per cent and 12 per cent increases for the respective World and GCC Indices. We believe the anticipation of a positive announcement from MSCI regarding the upgrade is in part a driver for the outperformance of Kuwait this year, in addition to solid results from certain sectors such as banking.
Just to put things into context, the market has had a very good run since the FTSE EM upgrade announcement in September 2017, rising almost 34 per cent to date. It is important to keep that in mind when building expectations for future returns. Nonetheless, we still have a positive outlook on the Kuwaiti stock market over the medium-term, as we believe it offers investors the right mix of fundamental attractiveness and fund flow catalyst. We believe Kuwait is in a ‘sweet-spot’ from a macro perspective considering its comparatively low budget-breakeven level - one of the lowest in the GCC. This allows Kuwait to stay on course for executing its ambitious infrastructure-spending plan and maintain or potentially grow its sovereign wealth reserve.
Kuwait’s robust infrastructure spending plan is likely to result in notable GDP growth over the medium-term as per IMF forecasts. This is likely to have a multiplier effect resulting in earnings growth across multiple sectors especially the banks, which are very well represented in the market. Our fundamental case for Kuwait is strengthened by the funds flow angle. Following the FTSE flows, the attention now shifts to the potential MSCI upgrade. As mentioned earlier, this is a significant event and with the right ingredients can attract foreign flows that are more sizable than seen before.
From a structural perspective, we are also excited about the reforms that are taking place in Kuwait to open up the market further and employ global best practices when it comes to rules and regulations that govern the market. The reform process initiated by both Boursa Kuwait and the CMA is creating a more robust platform that allows improved access, transparency and accountability in the market. This will lead to a better functioning market and is at the heart of the push to upgrade Kuwait to EM status.
Husayn Shahrur, PhD and Wajih Al Boustany are respectively, managing director and assistant vice president, Mena Asset Management at NBK Capital, a member of The Gulf Bond and Sukuk Association
UAE currency: the story behind the money in your pockets
The story in numbers
18
This is how many recognised sects Lebanon is home to, along with about four million citizens
450,000
More than this many Palestinian refugees are registered with UNRWA in Lebanon, with about 45 per cent of them living in the country’s 12 refugee camps
1.5 million
There are just under 1 million Syrian refugees registered with the UN, although the government puts the figure upwards of 1.5m
73
The percentage of stateless people in Lebanon, who are not of Palestinian origin, born to a Lebanese mother, according to a 2012-2013 study by human rights organisation Frontiers Ruwad Association
18,000
The number of marriages recorded between Lebanese women and foreigners between the years 1995 and 2008, according to a 2009 study backed by the UN Development Programme
77,400
The number of people believed to be affected by the current nationality law, according to the 2009 UN study
4,926
This is how many Lebanese-Palestinian households there were in Lebanon in 2016, according to a census by the Lebanese-Palestinian dialogue committee
Cricket World Cup League 2
UAE squad
Rahul Chopra (captain), Aayan Afzal Khan, Ali Naseer, Aryansh Sharma, Basil Hameed, Dhruv Parashar, Junaid Siddique, Muhammad Farooq, Muhammad Jawadullah, Muhammad Waseem, Omid Rahman, Rahul Bhatia, Tanish Suri, Vishnu Sukumaran, Vriitya Aravind
Fixtures
Friday, November 1 – Oman v UAE
Sunday, November 3 – UAE v Netherlands
Thursday, November 7 – UAE v Oman
Saturday, November 9 – Netherlands v UAE
EA Sports FC 24
Low turnout
Two months before the first round on April 10, the appetite of voters for the election is low.
Mathieu Gallard, account manager with Ipsos, which conducted the most recent poll, said current forecasts suggested only two-thirds were "very likely" to vote in the first round, compared with a 78 per cent turnout in the 2017 presidential elections.
"It depends on how interesting the campaign is on their main concerns," he told The National. "Just now, it's hard to say who, between Macron and the candidates of the right, would be most affected by a low turnout."
French business
France has organised a delegation of leading businesses to travel to Syria. The group was led by French shipping giant CMA CGM, which struck a 30-year contract in May with the Syrian government to develop and run Latakia port. Also present were water and waste management company Suez, defence multinational Thales, and Ellipse Group, which is currently looking into rehabilitating Syrian hospitals.
The biog
Title: General Practitioner with a speciality in cardiology
Previous jobs: Worked in well-known hospitals Jaslok and Breach Candy in Mumbai, India
Education: Medical degree from the Government Medical College in Nagpur
How it all began: opened his first clinic in Ajman in 1993
Family: a 90-year-old mother, wife and two daughters
Remembers a time when medicines from India were purchased per kilo
Day 3, Abu Dhabi Test: At a glance
Moment of the day Just three balls remained in an exhausting day for Sri Lanka’s bowlers when they were afforded some belated cheer. Nuwan Pradeep, unrewarded in 15 overs to that point, let slip a seemingly innocuous delivery down the legside. Babar Azam feathered it behind, and Niroshan Dickwella dived to make a fine catch.
Stat of the day - 2.56 Shan Masood and Sami Aslam are the 16th opening partnership Pakistan have had in Tests in the past five years. That turnover at the top of the order – a new pair every 2.56 Test matches on average – is by far the fastest rate among the leading Test sides. Masood and Aslam put on 114 in their first alliance in Abu Dhabi.
The verdict Even by the normal standards of Test cricket in the UAE, this has been slow going. Pakistan’s run-rate of 2.38 per over is the lowest they have managed in a Test match in this country. With just 14 wickets having fallen in three days so far, it is difficult to see 26 dropping to bring about a result over the next two.
The low down on MPS
What is myofascial pain syndrome?
Myofascial pain syndrome refers to pain and inflammation in the body’s soft tissue. MPS is a chronic condition that affects the fascia (connective tissue that covers the muscles, which develops knots, also known as trigger points).
What are trigger points?
Trigger points are irritable knots in the soft tissue that covers muscle tissue. Through injury or overuse, muscle fibres contract as a reactive and protective measure, creating tension in the form of hard and, palpable nodules. Overuse and sustained posture are the main culprits in developing trigger points.
What is myofascial or trigger-point release?
Releasing these nodules requires a hands-on technique that involves applying gentle sustained pressure to release muscular shortness and tightness. This eliminates restrictions in connective tissue in orderto restore motion and alleviate pain. Therapy balls have proven effective at causing enough commotion in the tissue, prompting the release of these hard knots.
Director: Shady Ali
Cast: Boumi Fouad , Mohamed Tharout and Hisham Ismael
Rating: 3/5
Global Fungi Facts
• Scientists estimate there could be as many as 3 million fungal species globally
• Only about 160,000 have been officially described leaving around 90% undiscovered
• Fungi account for roughly 90% of Earth's unknown biodiversity
• Forest fungi help tackle climate change, absorbing up to 36% of global fossil fuel emissions annually and storing around 5 billion tonnes of carbon in the planet's topsoil
Springsteen: Deliver Me from Nowhere
Director: Scott Cooper
Starring: Jeremy Allen White, Odessa Young, Jeremy Strong
Rating: 4/5
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
UAE currency: the story behind the money in your pockets
Teaching in coronavirus times
Types of bank fraud
1) Phishing
Fraudsters send an unsolicited email that appears to be from a financial institution or online retailer. The hoax email requests that you provide sensitive information, often by clicking on to a link leading to a fake website.
2) Smishing
The SMS equivalent of phishing. Fraudsters falsify the telephone number through “text spoofing,” so that it appears to be a genuine text from the bank.
3) Vishing
The telephone equivalent of phishing and smishing. Fraudsters may pose as bank staff, police or government officials. They may persuade the consumer to transfer money or divulge personal information.
4) SIM swap
Fraudsters duplicate the SIM of your mobile number without your knowledge or authorisation, allowing them to conduct financial transactions with your bank.
5) Identity theft
Someone illegally obtains your confidential information, through various ways, such as theft of your wallet, bank and utility bill statements, computer intrusion and social networks.
6) Prize scams
Fraudsters claiming to be authorised representatives from well-known organisations (such as Etisalat, du, Dubai Shopping Festival, Expo2020, Lulu Hypermarket etc) contact victims to tell them they have won a cash prize and request them to share confidential banking details to transfer the prize money.
