Saudi bond index inclusion paves way for $30bn regional windfall

Saudi Arabia is set to be included in JP Morgan’s emerging market government bond indexes next year, potentially unlocking billions of dollars in fresh investment.
It comes at a key time for the Kingdom’s emerging capital markets as both the government and companies increasingly consider bond sales to raise capital, encouraged by financial reforms that are aimed at reducing economic reliance on oil revenues.
Inclusion in the indexes helps to reduce borrowing costs and opens up Saudi Arabia to a much bigger pool of debt investors.
A similar trend is also under way in equities with the Kingdom’s recent inclusion in the MSCI Emerging Markets Index.
The UAE, Bahrain, Kuwait and Qatar will also become eligible for EMBI Global Diversified (EMBIGD), EMBI Global (EMBIG) and EURO-EMBIG indexes, Reuters reported on Wednesday. The process will be phased between Jan. 31 and Sept. 30, 2019.
That could lead to an estimated $30 billion in inflows, leading to tighter spreads and making primary market access easier, according to Bank of America Merrill Lynch.
Bahrain could emerge as the biggest beneficiary from EMBI inclusion.

From: Arab News