Blackrock expanded its single-country exchange traded fund (ETF) offering last week when it unveiled the iShares MSCI Kuwait ETF on the Cboe BZX Exchange, providing exposure to the Middle Eastern nation before its upgrade from the MSCI Frontier Markets Index to the Emerging Markets Index.
The iShares MSCI Kuwait ETF (KWT) seeks to track the investment results of its benchmark index – the MSCI All Kuwait Select Size Liquidity Capped Index – and will use caps to ensure that the largest companies’ weightings are not in excess of 25% of the fund. It will also ensure that the most liquid securities are included. The fund’s expense ratio is 0.74% and the NAV as of Friday 4th September is $25.18.
There are 30 companies in the ETF that represent some of the most liquid assets available on the Kuwait Stock Exchange. The three largest constituents are National Bank of Kuwait (22.7%), Kuwait Finance House (20.13%), Ahli United Bank (4.52%). With the exception of Ahli United Bank, all stocks are domiciled in Kuwait.
Financial companies dominate the ETF and account for two-thirds (66.93%) of the overall allocation. Industrials are in second with a 13.17% weight (the largest being The Public Warehousing, 4.45%), while Real Estate and Communication companies make up a small proportion with 6.21% and 4.3% respectively. Despite its economy being heavily reliant on oil, Energy companies only account for 1.07% of the fund, represented by Heavy Engineering Industries & Shipbuilding Company. The cash position in the ETF is 0.13% and is held in US dollars.
The launch of KWT comes nearly a year after the launch of the Invesco MSCI Kuwait UCITS ETF (MKUW), which tracks the performance of a much smaller group of companies compared to Blackrock’s new addition. MKUW is down by just over 5% since it launched in October 2019 and has also lost almost 14% since the start of the year.
Kuwait’s ascension to MSCI’s Emerging Markets category was postponed earlier in the year due to the impact of the COVID-19 pandemic and will instead be promoted at the end of the year. The country was promoted to the Emerging Markets category by both FTSE and S&P in 2019.
Kuwait is currently the largest constituent in the MSCI Frontier Markets Index and enjoys a weighting of over 36% – over double the allocation assigned to the next largest country Vietnam (17.19%) – while also boasting three companies in the Top 5 Constituents: National Bank of Kuwait (17.55%, 1st), Kuwait Finance House (8.28%, 2nd) and Mobile Telecom Company (4.00%, 4th).
The iShares MSCI Kuwait ETF will join Blackrock’s three other ETFs that focus on the Middle East: iShares MSCI Saudi Arabia ETF (KSA US), iShares MSCI Qatar ETF (QAT US) and iShares MSCI UAE ETF (UAE US).
A full list of Frontier Market ETFs can be found here.