Saudi Arabia expects $11 bln inflows from JP Morgan bond index entry

Saudi Arabia expects $11 bln inflows from JP Morgan bond index entry
Saudi Arabia’s bonds will have a 3.1 percent weighting in the JP Morgan indexes. (File/AFP)
Updated 29 September 2018

Saudi Arabia expects $11 bln inflows from JP Morgan bond index entry

Saudi Arabia expects $11 bln inflows from JP Morgan bond index entry
  • Saudi Arabia, together with the UAE, Qatar, Bahrain and Kuwait, will enter JP Morgan’s emerging market government bond indexes next year
  • Saudi Arabia’s bonds will have a 3.1 percent weighting in the JP Morgan indexes

Arab news LONDON: Saudi Arabia looks set to attract an $11 billion windfall of foreign funds after being included in a key international debt index.

The Kingdom will be part of JP Morgan’s emerging market government bond indexes next year, helping to reduce borrowing costs and opening up Saudi Arabia to a much bigger pool of debt investors.

“Since the first launch of international bonds in 2016, the Debt Management Office’s (DMO) approach to international issues has evolved to facilitate access to global debt markets, the Saudi Ministry of Finance said in a statement on Saturday

“Continued communication with investors globally has also contributed an increase in strategic initiatives such as index inclusion.”

The DMO estimates inflows of about $11 billion as a result of the JP Morgan listing. It comes at an important 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.

The UAE, Bahrain, Kuwait and Qatar will also become eligible for EMBI Global Diversified (EMBIGD), EMBI Global (EMBIG) and EURO-EMBIG indexes. 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.

Saudi Arabia, Bahrain, Kuwait, Oman and Qatar have issued a quarter of all new debt sold by emerging market countries in each of the past three years, according to Reuters data.