JPMorgan Features Sri Lanka Among Top Weights in New Frontier Debt Index

Sri Lanka has been assigned a 7.5% weighting in J.P. Morgan’s new frontier-market local-currency government bond index, placing the country among the largest components of the benchmark.

The Government Bond Index–Emerging Markets Edge, or GBI-EM Edge, is expected to be launched by the end of September and will track close to US$330 billion in government bonds across 26 frontier markets.

Sri Lanka’s 7.5% share is just below the maximum country weighting of 8%.

Vietnam, Egypt, Morocco, Pakistan, Bangladesh and Kazakhstan have each been assigned the maximum 8% weighting, while Nigeria accounts for around 7.4%.

In simple terms, the index acts as a guide for international investors looking at government bonds issued in the domestic currencies of smaller emerging or “frontier” economies.

Sri Lanka’s inclusion means rupee-denominated government bonds will form a relatively large part of that benchmark.

However, a 7.5% weighting does not mean that 7.5% of a fixed amount of foreign investment will automatically flow into Sri Lanka. Rather, investors and fund managers who follow or compare their portfolios against the index may use that weighting as a reference when deciding how much exposure to hold.