The Kuwait Stock Exchange (KSE) recently joined the MSCI Emerging Markets Index, which is designed to measure the performance of companies in emerging market countries based on liquidity, ease of investment and transparency, and periodic assessments of their positions.

This ascension represents a major achievement for Kuwait, whereby its stock exchange will become an even more attractive investment hub for local and foreign capital. Interestingly, the FTSE Russell predicted that Kuwait’s joining of the index would draw $750 million to the local market, and this reflects progress achieved in fulfilling global standards for stock exchanges as well as the development of Kuwaiti legislative and legal systems.

Besides Kuwait, the Saudi Stock Exchange is also expected to join the MSCI Emerging Markets Index by mid-2018 after it completes the requirements, thus having a direct impact not only on the Saudi market but also on the region as a whole as it is the largest bourse in the region.

Most importantly, this will coincide with the world’s largest oil company’s sale of 5 per cent of its shares through an IPO in the international markets next year, which will give the Saudi market a strong boost. Other factors such as oil rising to $60 per barrel as well as the announcement of giant projects in three of the most important regions of the Kingdom will also increase the flow of capital, particularly foreign funds. This is evidenced by FTSE’s expectations for the Saudi market to attract $3.5 billion in investments The Abu Dhabi and Dubai stock markets are already part of the MSCI Emerging Markets Index, and that resulted in an influx of capital and in the number of investors, making the UAE the region’s most attractive destination for local and foreign investment in recent years.

More joint stock companies have been listed on the stock exchange despite the effect of the global financial crisis and the deterioration in oil prices. However, the Gulf’s financial markets have remained coherent, especially after joint stock companies achieved outstanding profits, including bank. This raised the volume of dividend distributions contrary to some concerns that suggested such distributions could be affected by the general economic conditions, primarily the decline in oil prices and rise in budgetary deficit.

This means the Gulf financial markets are moving in the right direction on firming up their strategic approach, which aims to enhance the role of private sector and of public shareholding institutions that can attract funds from small investors. This would significantly contribute to bolstering development.

It has become noticeable that more industrial shareholding companies are being listed on the stock market, which for many years was restricted to service and financial institutions.

Kuwait’s joining will contribute to increasing the concentration of capital, particularly among those looking for viable investment opportunities. It will also draw in further foreign investments, thereby increasing growth rates and diversifying GCC economies as planned.

As the Gulf markets have become more open, there will emerge a convergence of growth and development levels. This will become a crucial factor for possible future coordination.

This requires Bahrain and Oman to modify and develop their legislation to join the index of emerging markets, which will help achieve integration and increase the developmental role of Gulf financial markets.

Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.