JPMorgan to add $79bn of Saudi sukuk to key EM index

The latest:

Eight Saudi riyal-denominated sovereign sukuk worth $79 billion will enter JPMorgan’s widely tracked local-currency emerging-market debt index in stages beginning January 29, 2027, the bank said Thursday, according to Reuters. The Philippines enters alongside Saudi Arabia, with both countries phased in over ten months. The two additions were first sketched out in April.

Details:

• The mechanics: JPMorgan said the inclusion will bring Saudi riyal-denominated sovereign sukuk and Philippine peso-denominated government bonds into the GBI-EM index series, a benchmark followed by a large share of emerging-market debt investors, with weights introduced gradually rather than in a single step.
• The Saudi weight: Saudi Arabia’s weight will reach 2.71% once inclusion is complete, according to Reuters, slightly above the level announced when the plan was first outlined in April. The kingdom’s entry covers eight sukuk instruments with a combined face value of $79 billion.
• The Philippine side: The Philippines will reach a 1.64% weight at full inclusion, marginally below what had been indicated earlier, Reuters reported. Nine Philippine government bonds with a total face value of $50 billion will be added to the index alongside the Saudi instruments.
• The timeline: The phase-in runs over ten months from January 29, 2027, meaning index weights build progressively through most of that year. JPMorgan did not publish a month-by-month breakdown of how each country’s weight rises during the period.
• The wider reshuffle: The additions form part of a broader index revision that cuts the country cap — the maximum weight any single country may hold in the diversified version of the benchmark — to 9% from 10%, according to Reuters.
• Who gets trimmed: As a result of the lower cap, the weights of several large emerging markets will be reduced to the new ceiling, including China, India, Mexico, Malaysia and Indonesia. The reduction is mechanical, driven by the cap change rather than by any country-specific assessment.
• Why the index matters: GBI-EM is a benchmark that global asset managers track directly or measure performance against, so changes to its composition shift how passive and benchmarked portfolios allocate across emerging-market local debt regardless of individual investment views.
• What was not stated: Neither JPMorgan nor the Reuters report set out an estimate of how much investor money would follow the Saudi and Philippine additions, and no comment from Saudi or Philippine debt authorities was included.
• Also: The Philippines joins alongside at 1.64%, with nine peso bonds worth $50 billion.

Background:

Saudi Arabia has built out a riyal-denominated sukuk programme as part of financing needs tied to its spending plans, issuing domestic Islamic instruments alongside international dollar bonds. Local-currency index inclusion is the stage at which that domestic curve becomes visible to the global benchmarked investor base.

Between the lines:

The 2.71% weight attached to $79 billion of sukuk places Saudi Arabia among the larger new entrants to the benchmark, while the simultaneous cut in the country cap to 9% from 10% frees index space that previously sat with China, India, Mexico, Malaysia and Indonesia. The gradual ten-month phase-in, rather than a single-date entry, spreads any resulting portfolio reallocation across 2027.

What’s next

The first inclusion step falls on January 29, 2027. Watch for confirmation from JPMorgan or Saudi debt authorities, the published month-by-month weighting schedule, and riyal sukuk pricing as the phase-in start approaches.