Wednesday 27, June 2018 by Kudakwashe

JP Morgan consults on including Gulf states in key bond index

 

JP Morgan's EMBI bond index is a key performance benchmark for emerging market investors

  

JP Morgan has started a consultation on including Gulf states in its widely tracked emerging market government bond indexes, although a number of issues remain sticking points.

Inclusion in the index can encourage hundreds of billions of dollars of buying of that country's bonds, lowering its borrowing costs, reported Zawya.

Saudi Arabia, Bahrain, Kuwait, Oman and Qatar have issued a quarter of all new debt sold by emerging markets in each of the last three years and they now account for 14 per cent of total EM debt stock.

Dino Kronfol, Chief Investment Officer for global Sukuk and MENA fixed-income strategies at Franklin Templeton said, “it would be a tremendous development and very positive for the region, particularly efforts to develop regional capital markets,” Zawya reported.

Indices work to strict rules of eligibility and this rumoured scenario with GCC countries (gaining inclusion) may never come to pass, however, there could be other ways to look at it, such as purchasing power parity ratios that the IMF and OECD use to compare different countries' wealth, according to Zawya.

That would class GCC countries firmly as emerging markets.

 

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