J.P. Morgan today announced the introduction of a new emerging markets fixed income index, the J.P. Morgan Middle East Composite Index (MECISM), that holistically captures the Middle Eastern U.S. dollar-denominated debt market covering sovereign, quasi-sovereign and corporate issuers. The MECI represents 73% of the Middle Eastern US dollar external debt asset class, tracking 61 issuers and 167 instruments spanning 10 countries. The new addition to the J.P. Morgan family of fixed income indices has a total market value of $156.5 billion.
“The Middle East has become an increasingly important component of the emerging markets debt universe after a decade of prolific issuance. The MECI will be a comprehensive and versatile benchmarking tool for domestic and global investors in Middle Eastern bonds,” said Stephen Dulake, J.P. Morgan’s Head of International Credit Research.
MECI closely follows the methodology of J.P. Morgan’s Emerging Markets Bond Index Global (EMBI) and Corporate Emerging Markets Bond Index Broad (CEMBI), which are the most widely used benchmarks for investors in U.S. dollar-denominated emerging markets sovereign and corporate bonds, respectively. MECI selects issuers that are domiciled in the Middle East region and contains the following countries: Bahrain, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia and United Arab Emirates.
“The MECI vastly expands the J.P. Morgan fixed income index coverage of Middle Eastern debt by encapsulating several major sovereign, quasi-sovereign and corporate issuers in the region which are not captured in the flagship J.P. Morgan emerging markets indices such as the EMBI and the CEMBI,” said Gloria Kim, J.P. Morgan’s Head of Global Index Research. “It continues a legacy of premier index products developed by J.P. Morgan and underscores the firm’s dedication to developing emerging markets.”
The MECI consists of regularly traded, liquid fixed and floating rate instruments that have a minimum face amount outstanding of $300 million and at least 5 years until maturity at issuance.
Over 11 years of historical daily index levels and statistics are available for the aggregate, credit, country and sector subindices of MECI, beginning December 31, 2001. Clients and investors can access index levels and statistics for the MECI SM on www.jpmorganmarkets.com.
Table 1: J.P. Morgan MECI country and instrument rules | ||||
| Inclusion Criteria | MECI | |||
| Country requirements | Middle East only* | |||
Instrument requirements | ||||
| Minimum issue size: | US$300 million | |||
| Maturity requirement for | At least 5 | |||
| entry: | until maturity | |||
| Maturity requirement to | At least 1 year until | |||
| maintain inclusion: | maturity | |||
Issuer type inclusion: | ||||
Sovereign | Yes | |||
Quasi-sovereign | Yes | |||
Corporate | Yes | |||
Sukuk | Yes | |||
*Middle East as defined by the World Bank excluding North Africa | ||||
Table 2: J.P. Morgan MECI country and subindex overview (as of September 30, 2013) | ||||||||||||||
Mkt Val | MECI | Spread | Yield | |||||||||||
S&P/Moody’s | US$ (bn) | WGT (%) | Dur | (bps) | (%) | |||||||||
MECI | A- / A2 | 156.5 | - | 5.3 | 238 | 4.67 | ||||||||
By Issuer Type | ||||||||||||||
| Corporate | A- / A3 | 74.7 | 47.6 | 4.9 | 245 | 6.03 | ||||||||
| Quasi-Sovereign | A+ / A1 | 24.3 | 15.5 | 5.1 | 183 | 4.06 | ||||||||
| Sovereign | BBB+ / Aa3 | 57.6 | 36.7 | 5.8 | 249 | 4.78 | ||||||||
By Country | ||||||||||||||
| Bahrain | BBB / Baa1 | 7.4 | 4.7 | 5.1 | 332 | 5.36 | ||||||||
| Iraq | NR | 2.3 | 1.5 | 7.4 | 511 | 7.70 | ||||||||
| Israel | BBB+ / A3 | 16.2 | 10.3 | 6.7 | 191 | 4.35 | ||||||||
| Jordan | BB- / B1 | 0.8 | 0.5 | 1.9 | 331 | 3.68 | ||||||||
| Kuwait | BBB- / Baa3 | 1.6 | 1 | 4.3 | 382 | 5.44 | ||||||||
| Lebanon | B / B1 | 14.5 | 9.3 | 4.9 | 430 | 6.21 | ||||||||
| Oman | BBB- / A1 | 0.8 | 0.5 | 3.2 | 407 | 5.06 | ||||||||
| Qaar | AA- / Aa3 | 44.2 | 28.2 | 5.6 | 145 | 3.78 | ||||||||
| Saudi Arabia | A+ / A1 | 7.7 | 4.9 | 5.2 | 161 | 4.09 | ||||||||
| United Arab Emirates | A / A3 | 61.1 | 39 | 4.8 | 251 | 4.87 | ||||||||
By Credit Bucket | ||||||||||||||
| Investment Grade | A + / A1 | 120.5 | 77 | 5.4 | 185 | 4.16 | ||||||||
| High Yield | B+ / Ba3 | 36.0 | 23 | 4.7 | 404 | 6.30 | ||||||||
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Amanda.e.smith@jpmorgan.com
