JP Morgan considers adding Gulf states to its key bond index

JP Morgan has started a consultation on including Gulf Cooperation Council (GCC) states in its widely tracked emerging market government bond indexes, Reuters reported on Tuesday.

JP Morgan's EMBI bond index is a key performance benchmark for emerging market investors. Inclusion in the index can attract hundreds of billions of dollars of buying of that country's bonds, lowering its borrowing costs, the news agency said.

A decision on the index update is usually announced around September.

A source at the bank told Reuters that its "indices work to strict rules of eligibility and this rumored scenario with GCC countries (gaining inclusion) may never come to pass."

The bank, however, declined to comment, the report said.

According to JP Morgan's estimates, about $360 billion track its hard-currency emerging market debt indexes. About $150 billion of debt from GCC may get added with an expected weight of 12.33 percent. A phase-in could happen at 2 percent a month for six months, the report said.

Gulf Cooperation Council (GCC) countries - Saudi Arabia, Bahrain, Kuwait, Oman and Qatar - have issued a quarter of all new debt sold by emerging markets in each of the last three years. They now account for 14 percent of total EM debt stock, the report said.