Kuwait has long been nicknamed the Sleeping Giant of the Gulf, and it is not exactly intended as a compliment. Kuwait is considered one of the least interesting of the Mideast regional economies and has done little to attract foreign investment. But that reputation might be set for a change.
Kuwait’s stock market is being considered for a bump-up to emerging markets status by major index providers, and that would be a significant reclassification within the world of investors. Index funds tracking emerging markets benchmarks, and active fund assets benchmarked against emerging markets indexes, are far larger in size and popularity than frontier markets portfolios.
There are 30 exchange-traded funds tracking EM benchmarks, and the three largest ETFs tracking the MSCI and FTSE emerging markets indexes have roughly $135 billion in assets between them. There are two frontier market ETFs with a total asset base of roughly $600 million. Kuwait is the largest country weight in the MSCI and FTSE frontier markets index, at over 21 percent and 19 percent, respectively.
In June, MSCI said it would place the MSCI Kuwait Index under review for a potential reclassification from frontier markets to emerging markets status in 2019. Rival index provider FTSE Russell hasn’t classified Kuwait historically, but starting September of this year, it will be classified as a secondary emerging market — it also has an advanced emerging market group.