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Closing the Gulf: How The GCC Countries Fit Into Our Emerging Debt Investment Process

By Carl Ross

Insights

April 05, 2019

Executive Summary

The inclusion of five Gulf Cooperation Council (GCC) countries as of January 2019 into the benchmark EMBIG index represents one of the largest one-time index adjustments in recent memory. By the time the GCC countries are fully phased into the benchmark later this year, they will collectively account for about a 12% weighting, from virtually zero. Inclusion of these countries will increase the overall credit quality of the benchmark, lower its yield, and increase its exposure to oil price fluctuations. We use this as an opportunity to remind readers of our country risk process, highlighting some of the unique characteristics of these countries, how they fit into our relative valuation framework, and what this important market development means for our external debt portfolios.

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Disclaimer: The views expressed are the views of Carl Ross through the period ending March 2019, and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.
Copyright © 2019 by GMO LLC. All rights reserved.
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