Ahead of Kuwait’s ascension to “Emerging Market” from “Frontier Market” by Morgan Stanley Capital International (MSCI), The Invesco MSCI Kuwait UCITS ETF (MKUW) has been launched in order to allow investors to tap into the Kuwaiti equity market.
The Invesco MSCI Kuwait UCITS ETF (“the ETF”) will track the performance of the MSCI Kuwait 20/35 Index, after the impact of fees. As a tracker fund, it will capture 85% of Kuwait’s equity market via 9 constituent companies. The largest entity in the ETF will be constrained to 35% and the weights of the remaining eight companies will be constrained to a maximum of 20%. It is the second ETF to be launched this year, after the HANetf Kuwait Equity UCITS ETF was launched in April.
As of the end of September, the largest constituent in the MSCI Kuwait 20/35 Index is the National Bank of Kuwait, making up 27.53% of the index. Mobile Telecom Co (18.13%), Kuwait Finance House (17.28%) and Agility (11.02%) are constituents with more than a 10% weighting in the benchmark. In terms of sector weightings, Financials dominate the majority 59.72% of the index (National Bank of Kuwait, Kuwait Finance House, Gulf Bank, Boubyan Bank and Burgan Bank), while Communications (18.13%), Industries (11.02%), Real Estate (6.29%), Materials (4.84%) make up relatively smaller positions.
Kuwait’s promotion is planned for June 2020, assuming that enhancements to its equity market have been completed by the end of November this year. It is anticipated to hold a 0.5% weighting in the MSCI Emerging Markets Index.
Chris Mellor, Head of EMEA ETF Equity Product Management at Invesco, says:
“With an index comprising financials, communication services, industrials, real estate and materials sectors, our new ETF offers investors the opportunity to gain exposure to those companies at the heart of the long-term transformation taking place in Kuwait. In the shorter term, the inclusion into the MSCI Emerging Markets Index could drive significant inflows from asset managers needing to maintain benchmark weights.”
The ETF is listed on the London Stock Exchange and traded in US dollars with a launch price of $42.54. It has an ongoing charge of 0.9% per annum (0.5% management fee and 0.4% swap fee) and dividends will be accumulated in the fund.