MSCI May 2020 SAIR | COVID-19 risks surround May rebalance; Eye Kuwait upgrade and actions in UAE
COVID-19 outbreak could threaten May rebalance execution. The virus outbreak caused serious workflow disruptions, in addition to frequent and sudden market closures. This has pushed S&P Dow Jones to postpone its quarterly rebalance for its equity indices, originally scheduled for Mar-20. FTSE also pushed 75% of the fifth tranche of Saudi’s inclusion to May from March. We believe MSCI could opt to postpone the rebalance if current dynamics intensify further.
Kuwait EM upgrade to materialise if rebalance goes through. We expect Kuwait’s IMI to include 19 constituents, eight of which would be in the Standard index, and 11 in the Small Cap index. We expect MSCI to exclude MEZZAN KK and ALAFCO KK (both fail liquidity) from Kuwait’s IMI, while we eye SHIP KK to also exit as it falls 15% below the FMC cut-off. We reiterate our expectation that Kuwait will witness inflows of cUSD 2.8bn, of which NBK KK would be the biggest beneficiary, with USD1.2bn (54 DTT) of inflows, followed by KFH KK, with USD586mn (25 DTT). The financial sector continues to dominate, amounting to 47.5% of the Kuwait IMI, followed by industrials at 21.1% and real estate at 10.5%.
Two potential additions, one deletion in UAE Standard index. In the UAE, we expect the inclusion of EMIRATES UH potentially capturing 8% of the index, with inflows of USD366mn (39 DTT). ADIB UH could join the UAE’s Standard index in the upcoming rebalance, if its recently approved FOL hike to 40% is implemented (pending the regulator’s approval) before the last ten business days of April (May’s FMC cut-off), with a weight of 5% and inflows of USD228mn (79 DTT). If DIB UH receives the regulator’s approval to increase its FOL to 40% from 25%, its weight will increase to 9.7% from 5.3%, with inflows of USD198mn (17DTT). We look for EMAARMLS UH to exit the index, as it falls 34% below the FFMC cut-off, missing the buffer range of 33%. The stock would witness outflows of USD167mn (70 DTT) in case of deletion. In Qatar, QATI QD falls below the FFMC cut-off by 46%, and is expected to exit the index with outflows of USD231mn (21 DTT).
CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.
Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.
CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.
The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.
CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.
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