EM Index Inclusion Could Spell A New Chapter for GCC Bonds
2019-12-08 12:32

Historically, debt markets in Gulf Cooperation Council (GCC) countries have been unable to qualify for inclusion in emerging-market fixed income indexes, or any other major fixed income index. The qualities associated with GCC countries, such as higher per-capita income levels and investment-grade debt, tend to exceed the criteria for index inclusion, even though they possess characteristics on par with emerging markets.


Here, Mohieddine (Dino) Kronfol, chief investment officer, Franklin Templeton Global Sukuk and MENA Fixed Income Strategies, explains why he and his team think the planned inclusion of the GCC in the prominent J.P. Morgan Emerging Market Bond Index (EMBI) could be an exciting milestone for the region.

富兰克林邓普顿环球伊斯/兰债券和中东北非固定收益策略团队首席投资官迪诺•克龙福尔解释了为何他和团队认为,将 GCC 纳入摩根大通新兴市场债券指数的计划是该地区振奋人心的一次里程碑事件。

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The recent announcement that Gulf Cooperation Council (GCC)1 countries are planned to be included in the Emerging Market Bond Index (EMBI)2 is an exciting milestone not only for the region, but for the wider fixed income universe, in our view.


J.P. Morgan is planning to add sovereign and quasi-sovereign debt issuers from Saudi Arabia, Qatar, the United Arab Emirates, Bahrain and Kuwait to the index between January 31 and September 30, 2019. This index expansion offers investors exposure to another region of bond opportunities within the index. Oman, the sixth member state of the GCC, is already included in the EMBI. This change will effectively bring all GCC member states into the index.

摩根大通计划在二零一九年一月三十一日至九月三十日期间将沙特阿拉伯、卡塔尔、阿拉伯联合酋长国、巴林和科威特的主/权和准主/权债务发行人纳入指数中。这一指数扩充为投资者提供了在指数内投资另一区域债券的机会。阿曼——海湾国家第六个成员国,已被纳入 EMBI。这一变化将推动所有 GCC 成员国加入该指数。

GCC inclusion in the EMBI could add around US$150 billion of debt to this index, according to J.P. Morgan's analysis. And, the region could represent 12 percentage points in the index by the time the new GCC countries are phased in over a six-month period, with a 2% weighting added monthly. This could bring total index representation from the Middle East up to 18%, putting it on par with emerging markets in other regions such as Europe (22%) and Asia (17%).3

根据摩根大通的分析,GCC 加入 EMBI 可为该指数增加大约 1,500 亿美元债券。而且,在六个月内,GCC 国家陆续加入指数后,该地区可能代表该指数的 12 个百分点,每月增加 2% 的权重。这可能使中东地区的总指数代表性高达 18%,与欧洲(22%)和亚洲(17%)等其他地区的新兴市场相当。[3]

Expanding the Index


J.P. Morgan's EMBI inclusion criteria for emerging markets currently relies on an index income ceiling (IIC) classification (a gross national income per capita below US$18,769), and a credit rating below investment grade at A-/A3 for three consecutive years. Interestingly, Oman is the only GCC country already in the EMBI due to its low gross domestic product (GDP) per capita. The remaining GCC countries have higher income levels than most other emerging markets, and their debt bears investment-grade ratings. So, these countries don't quite fit within the parameters outlined for the J.P. Morgan EMBI.

摩根大通关于新兴市场的 EMBI 纳入标准目前依赖于指数收入上限(IIC)分类(人均国民总收入低于 18,769 美元),以及连续三年低于 A-/A3 投资等级的信用评级。有趣的是,由于人均国内生产总值(GDP)低,阿曼是唯一一个已经在EMBI 中的 GCC 国家。其余 GCC 国家的收入水平高于大多数其它新兴市场,这些国家的债券为投资级债券。因而这些国家不太符合摩根大通 EMBI 所要求的参数。

As such, a change has been proposed that introduces a purchasing power parity (PPP) ratio4 to the EMBI. Countries with a PPP ratio below 60% will fit within the parameters for index inclusion even if their gross national income per capita is above the index income ceiling, or if their credit rating is classified as investment-grade.

因此,已[4]向 EMBI 提议引入购买力平价(PPP)比率。PPP 比率低于 60% 的国家,即使其人均国民总收入高于指数收入上限,或者其信用评级被归为投资级,也将符合指数纳入的参数。

In our view, it would increase liquidity and the size of the investible emerging-market universe as GCC bonds would become more visible to international investors.

我们认为,随着 GCC 债券在国际投资者视野内地位的提升,这将增加可投资新兴市场的流动性和规模。

The GCC Bond Market—A Decade in the Making

GCC 债券市场——发展中的十年

The GCC bond market is unrecognizable from a decade ago due to the volume of issuances—the market now stands at more than US$400 billion in total outstanding debt.5 Sovereign debt credit ratings for four of the six GCC countries are now “A1” or higher with a prominent international credit ratings agency.6

论发行量,GCC 债券市场与十年前相比已今非昔比——目前这一债券市场未偿债总额已超过 4,000 亿美元。[5]GCC 六个国家中有四个国家的主/权债务信用评级目前由一个著名的国际信用评级机构评级为“A1”或更高。[6]

A recent record-breaking year of GCC debt issuance—which includes traditional bonds and sukuk—to the tune of US$85 billion in 2017 came as a result of GCC governments' efforts to diversify economies away from a reliance on fossil fuels.

二零一七年是 GCC 债券发行创纪录的一年,总共发行了高达 850 亿美元的债券,包括传统债券和伊斯/兰债券,这是 GCC 政府努力使经济多元化、摆脱对化石燃料依赖的成果。

Investor considerations for these bonds include the potential impacts of oil-price volatility and adverse geopolitical events on GCC bonds. According to our research, GCC bonds typically have had a low correlation to oil prices and to other fixed income assets, yet can offer the potential for risk-adjusted returns as well as portfolio diversification.7

投资者对这些债券的考量包括油价波动和不利地缘政治事件对 GCC 债券的潜在影响。根据我们的研究,通常而言,GCC 债券与油价和其他固定收益资产相关性较低,但有潜力提供经风险调整的回报,并使投资组合多元化。[7]

In conclusion, we view this as a positive development that indicates that the GCC region could be on more solid footing than before, due to the development of the region's financial markets and a heavy government reprioritization on spending during periods of oil price volatility. And, as the region's economies continue to reform and develop, we think its inclusion in the EMBI will offer investors even more potential for fixed income diversification.

总之,我们认为这一区域事态正往积极方向发展,这表明 GCC 的基础比以前更稳固,这归因于该地区金融市场的发展和在油价波动期间政府对开支的重新排序。而且,随着该地区经济继续改革和发展,我们认为,将其纳入 EMBI 将为投资者提供的固定收益多元化潜力更大。

The comments, opinions and analyses presented herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.


Data from third-party sources may have been used in the preparation of this material and Franklin Templeton Investments (“FTI”) has not independently verified, validated or audited such data. FTI accepts no liability whatsoever for any loss arising from use of this information, and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user. Products, services and information may not be available in all jurisdictions and are offered by FTI affiliates and/or their distributors as local laws and regulations permit. Please consult your own professional adviser for further information on availability of products and services in your jurisdiction.

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有意从富兰克林邓普顿(Franklin Templeton)的邮件中了解更多信息,请订阅“新兴市场的投资冒险”(Investment Adventures in Emerging Markets)博客。

For timely investing tidbits, follow us on Twitter @FTI_emerging and on LinkedIn.

有意及时投资的话,请在推特上关注 @FTI_emerging和LinkedIn。

What Are the Risks?


All investments involve risks, including the possible loss of principal. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in emerging markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets' smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with emerging markets are magnified in frontier markets. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions.




1. The Gulf Cooperation Council is an alliance between six Middle Eastern countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates (UAE).


2. The J.P. Morgan Emerging Markets Bond Index tracks bonds in emerging markets. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses and sales charges.


3. Source: J.P. Morgan. These figures are estimates only. There is no assurance that any estimate, forecast or projection will be realized.


4. Purchasing power parity (PPP) measures the total amount of goods and services that a single unit of a country's currency can buy in another country. PPP can be thought of as an alternative currency exchange rate but based on actual prices.

[4] 购买力平价(PPP)衡量一国货币的单位在另一国能够购买的商品和服务的总量。 PPP 可被认为是另一种货币兑换汇率,但是基于实际价格。

5. Bloomberg, as of December 2017. Data excludes short-term issuance by central banks and other restricted interbank offerings. See www.franklintempletondatasources.com for additional data provider information.


6. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond's issuer, insurer or guarantor, may affect the bond's value.


7. Diversification does not guarantee profit or protect against risk of loss.


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