Saudi Arabia and four other Gulf nations will join JPMorgan Chase & Co.’s emerging-market bond indexes this month, potentially paving the way for billions of dollars in inflows into the securities.
The debt from the world’s biggest oil-exporting nation along with the UAE, Bahrain, Qatar and Kuwait will represent about 11.8 per cent of the EMBI Global Diversified Index and 12 per cent of the EMBI Global beginning January 31, according to JPMorgan. The indexes will track notes from 15 eligible issuers with a face value of about $119 billion.
“This provides more technical support to bond issuance for sovereigns in the region,” said Shamaila Khan, the director of emerging-market debt at AllianceBernstein in New York. The risk return profiles in Saudi Arabia, Qatar, the UAE and Bahrain look attractive, she said.
JPMorgan said Saudi Arabia’s approximate weight in the EMBIGD index is 3.3 per cent, followed by 2.8 per cent for Qatar, 2.6 per cent for the UAE, 2.3 per cent for Bahrain and 0.7 per cent for Kuwait. These figures are subject to change depending on bond sales in the coming two weeks. The Gulf nations’ bonds will be added in phases over nine months.
Their inclusion may spur about $30 billion in inflows, resulting in tighter spreads and easier primary-market access, Jean-Michel Saliba, a London-based economist at Bank of America Merrill Lynch, predicted in August.
The weight of Mexico, the largest country in the EMBIGD, will decline to 4.6 per cent from 5.1 per cent, according to JPMorgan. The next biggest exposures come from China, Indonesia and Turkey. Instruments from the new nations will need to have due dates after March 2022, JPMorgan said.