EUR 22.06 For Business Accounts Only

MSCI November 2020 SAIR | Kuwait to EM; ADIB UH to Standard Index; HRHO EY closing in; ZAINKSA AB imminent upgrade

Kuwait to finally be upgraded in Nov-20 SAIR, with potential inflows of USD3.3bn. MSCI announced Kuwait’s Provisional Index, which will have 17 constituents (seven of which are in the Standard Index and 11 in the Small Cap). This would exclude BURG KK and CABL KK from the indicative list. The main beneficiary from Kuwait’s EM upgrade is the banking sector, with NBK KK and KFH KK having the highest weights of 48% and 24%, respectively; ZAIN KK would follow by 11%.

Monitor HRHO/SWDY gap, possible switch in Egypt Standard Index. At current levels, SWDY EY falls c13% below the buffer range, calculated under the continuity rule, raising the chances of HRHO EY replacing it in the Standard Index. For this to take place, HRHO EY would need to rise by at least 8% from current levels by the last ten business days of Oct-20, assuming no change in SWDY EY’s current market price. Nonetheless, we note that a ≥13% price increase in SWDY EY would secure its position in the Standard Index, despite HRHO EY’s price performance. If HRHO EY joins the Standard Index, it could see inflows of cUSD47mn (30 DTT), while SWDY EY would move to the Small Cap Index, with estimated outflows of cUSD27mn (18 DTT). With further room for one stock in the Small Cap Index, we eye PIOH EY that is 5% away from the index’s cut-off.

ADIB to join UAE’s Standard Index. Based on ADIB UH’s FOL hike to 40%, the stock should join UAE’s Standard Index in November review. We estimate that ADIB UH’s inclusion would trigger inflows of cUSD220mn (62 DTT). ADIB UH’s inflows, on inclusion, will result in pro rata outflow from current constituents, with FAB UH to witness the largest outflow of cUSD51mn (3.4 DTT), followed by ETISALAT UH, with cUSD48.3mn outflows (8.7 DTT).

ZAINKSA AB to be upgraded to Standard Index, effective 15 October, on rights issue; Room remains for MOUWASAT AB to be upgraded. ZAINKSA AB’s rights issue, expected to be approved by the EGM on 14 October, is seen to increase the company’s MC by more than c50%. Accordingly, the stock would be eligible to migrate from the Small to the Standard Index (0.9% weight). In this regards, MSCI announced its intention to implement the migration, effective 15 October, and prior to the SAIR review date. We estimate this will trigger cUSD77mn (5 DTT) of inflows into the stock. Also, we flag that at current prices, MOUWASAT AB should be eligible to migrate to the Standard Index, which will attract net flows of cUSD26mn (10 DTT).