MSCI upgrade for UAE, Qatar doubtful

Thursday, 15 December 2011 00:55 - - {{hitsCtrl.values.hits}}

Reuters: Low market liquidity in the UAE and Qatar’s failure to raise foreign ownership limits threaten to deny MSCI emerging market status to the Gulf neighbours for a third time on Wednesday.

Index provider MSCI rates both the UAE and Qatar as frontier markets. It opted not to upgrade the pair at its reviews in 2009 and 2010, and was due to taken a decision in June this year but postponed its verdict to 14 December.

It said the delay was partly to allow market players more time to assess new delivery-versus-payment (DvP) settlement systems, which some of the bourses introduced in 2011.

MSCI has warned Qatar would be disqualified because of its 25 percent foreign ownership limit, but the gas-rich nation has not amended the ceiling, saying it was up to individual companies to open up their shares more to non-Qataris.

“I doubt it will happen for the UAE or Qatar, although the decision is not as clear-cut as we previously thought,” said Fahd Iqbal, EFG Hermes strategist.

“Qatar is unlikely to make it because of the foreign ownership limits – investors want broader access to stocks. The UAE is in a better position because almost everything is in place – it just needs favourable feedback from market players and that is very difficult to predict.”

But the UAE’s three bourses – Dubai Financial Market, Abu Dhabi Securities Exchange and Nasdaq Dubai – have been plagued by slumping trade and prices, which could affect MSCI’s decision, said Robert McKinnon, ASAS Capital’s Chief Investment Officer in Dubai.