Saudi Arabia, Qatar, UAE, Bahrain and Kuwait are set to join JP Morgan’s emerging market government bond indices in 2019.
The move is likely to result in billions of dollars of foreign investment gaining exposure to Gulf states’ sovereign debt.
Entry to the three bond indices – EMBI Global Diversified, EMBI Global and Euro-EMBIG – will be phased in between January and September 2019. Both conventional and Islamic bonds will be eligible, although the latter instruments will need a credit rating from at least one of the three major rating agencies.
The news follows the inclusion of Saudi Arabia in emerging market equity indices from MSCI and FTSE Russell, which is expected to attract more than $40 billion of international investor money into Saudi stocks.
Debt issuance in the Gulf region has risen markedly in recent years as states have turned to the fixed income market to support state spending in the face of falling oil prices. Gulf-based issuance now represents more than 15% of the stock of emerging market debt.
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