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Key upgrade of UAE,Qatar stock markets likely in Dec

DUBAI - The UAE and Qatar will have to wait for another six months to get their stock markets elevated to the coveted emerging market status, a key barometer that could help rekindle global investor confidence in the region.

Morgan Stanley Capital International, or MSCI, a global provider of equity benchmark indices to investors, on Wednesday postponed for six month its eagerly awaited decision on a potential upgrade of the UAE and Qatar stock markets to “emerging markets” from “frontier market” status.

An MSCI statement said that it was extending the review period for the potential reclassification of the MSCI Qatar and the MSCI UAE indices until December 2011 “in order to give additional time for market participants to assess recent enhancements implemented on the Qatari and Emirati markets”.

The move, although temporarily dashed hopes of an imminent stimulus to help the two stock markets woo a bigger stream of global investors and fund managers, thereby boosting the fortunes of listed firms, gave a clearer indication that the upgrade is well nigh a reality, analysts said.

“This is an unusual step for MSCI, and in our view suggests that promotion is highly likely to occur at that point,” said Andrew Howell Citigroup Global Markets.

“Some emerging market investors may interpret this as a signal that it is once again time to re-engage with Mena equities in anticipation of their joining the EM index,” said Howell.

The UAE and Qatar are currently bracketed as frontier markets alongside financial lightweights such as Vietnam, Kenya and Slovenia. An emerging markets upgrade would have positioned the two countries along with the world’s fastest growing economies, including India, China and Russia.

MSCI cited the May introduction of Deliver versus Payment, or DvP, settlement systems in the UAE as a key reason for this delay, which will give market participants more time to give their feedback.

Foreign ownership caps in the UAE and Qatar are often cited as the main stumbling block to an upgrade.

Increasing foreign ownership limits was one of the criteria set out by index compiler MSCI in its review of the UAE and Qatar for an upgrade to emerging market status, which could open the door to more foreign investment.

A few days ago, the UAE ruled out any immediate plan to raise the 49 per cent foreign ownership limit for listed firms.

“The new companies law will maintain the same percentage in terms of ownership,” Mohammed Al Shihhi, Undersecretary at the Economy Ministry said.

issacjohn@khaleejtimes.com

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