• Kuwait stocks, although not as high as Qatar and UAE, have also been beneficiaries of this transition, with one-year average performance numbers of 12.26%. The MSCI Emerging Markets Index return over the period was 5.37%.6 Although the outperformance is not as dramatic compared to UAE and Qatar, this is impressive given the fact that the Kuwait effect has not been a focal point of the upgrade announcement.
Many have looked at the performance of frontier market indexes as providing some diversification from general emerging market strategies, with distinct and unique profiles. A key component to the recent performance over the last three to five years in these indexes had been their Middle East exposure, which is being dramatically cut—as Qatar and UAE go from large weights in the frontier market indexes to smaller weights in the MSCI Emerging Markets Indexes. This may be motivation to increase allocations to the Middle East directly as a stand-alone allocation to help maintain the current exposure or try to participate in stocks that will see more flows with the upgrade announcement.
Middle East Summary
1Source: MSCI, as of 4/30/14
2Source: WisdomTree, as of 5/31/14
3Source: MSCI, MSCI Frontier Markets 100 Index Revised Methodology, April 2014
4Sources: WisdomTree, Bloomberg, as of 5/31/14
5Sources: WisdomTree, Bloomberg, 7/1/08–5/31/14
1WisdomTree, Bloomberg, 5/31/13–5/31/14. Kuwait stocks defined as MSCI Kuwait Index. The MSCI Kuwait Index is a market capitalization-weighted equity index designed to measure the performance of the Kuwaiti equity market
Important Risks Related to this Article
Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in emerging, offshore or frontier markets such as the Middle East are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments.