The second quarter was predictably slow in the region as Ramadan and Eid fell in May and June respectively. The MENA region moved in line with global markets during the quarter despite the price of Brent declining by 5%. The performance spread between the different markets was large with Kuwait up 8% while Lebanon was down 8%.

The positive market moves in Kuwait came on the back of the anticipated MSCI upgrade to emerging market status. Regulatory and operational enhancements have made the market more accessible to international investors, but the upgrade is conditional on further enhancements such as including omnibus account structures that would allow foreign investors to remain anonymous when trading. The conditions will most likely be met later this year as Kuwait´s Capital Markets Authority already have addressed these issues and are working on solving them. It is expected that the upgrade will attract almost $3bn in passive inflows and probably a similar amount of active money inflows, which will have a big impact as volumes in Kuwait are low. Despite the recent year’s upgrades in the region by the index providers, MENA equity markets are still the lowest foreign-owned emerging market region globally. Saudi is merely 4% owned by foreign portfolio investors while Qatar and UAE are 10-14% foreign-owned. Most emerging markets tend to be 30-50% owned by foreigners, so one can easily see a case of net inflows supporting the markets over the years to come.

Sources: Bloomberg LP