The 22-year-old, who made nine appearances in the Premier League last season, returned for a second spell at St Andrew's in the summer.
He was watched during the Blues' League Cup triumph over Swansea City, and Kinnear was impressed with the full-back.
A source close to the Midlands club told the Sunday People: "Ferguson had a particularly good game that night and Joe Kinnear told one of our officials he was interested in signing him.
"At first our guy thought he was joking but then he realised Kinnear did not know Ferguson was already a Newcastle player."
Ferguson has three years left to run on his contract at St James' Park.