JP Morgan to include Saudi Arabia, UAE, Qatar in key bond indexes

Saudi Arabia, along with the United Arab Emirates, Kuwait, Qatar, and Bahrain will enter JP Morgan’s emerging market government bond indexes next year, a move that's expected to attract billions of dollars of new foreign investment into their debt, Reuters reported, citing a JP Morgan statement sent to investors.

Sovereign and quasi-sovereign debt issuers from the four Gulf states will qualify for the EMBI Global Diversified (EMBIGD), EMBI Global (EMBIG) and EURO-EMBIG indexes, according to the statement.

The inclusion will be phased in between Jan. 31 and Sept. 30.

The weight of the four states will represent around 11.2 percent of JP Morgan’s EMBI Global Diversified and EMBI Global series upon inclusion.

Conventional bonds and sukuk will be eligible for inclusion in indexes, but sukuk will need to have a credit rating from at least one of the three major rating agencies to be included.

The minimum size for inclusion in the indexes is $500 million. Instruments will need to have a maturity date beyond March 2022, during the inclusion process, the statement added.

JP Morgan’s decision follows a surge of debt issuance from the Gulf Arab region in the past few years amid lower oil prices.

“It is estimated that around $360 billion of assets under management are benchmarked against the EMBIG family, with the EMBIG diversified at around $300 billion,” said Zeina Rizk, director of fixed income asset management at Arqaam Capital in Dubai.

This would translate into about $30 billion of inflows into the five countries’ debt, he added.