MSCI delays UAE, Qatar upgrade

MSCI, a global provider of investment decision support tools to investors, has postponed for another six months its decision on a potential upgrade of UAE and Qatar stock markets to emerging markets status, the index provider said in a statement yesterday.

MSCI currently classifies UAE and Qatar as frontier markets, and its decision on an upgrade was being keenly awaited by market participants. An upgrade is likely to interest more global investors and fund managers into the local markets, thus potentially propping up the fortunes of local listed firms.

The company said in the statement 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.”

MSCI said specifically that the market needed more time to assess the impact of the new delivery versus payment (DvP) models, which were introduced only last month and therefore it believed that “few market participants have had the opportunity to make a full assessment yet.”

It said that the extension would allow “the regulators and the stock exchanges to address the remaining concerns raised by international institutional investors.” The index provider cited “stringent foreign ownership limits” and “limited availability of shares to foreign investors” as issues that continue to concern international investors.

While the UAE allows up to 49 per cent foreign ownership of shares in its listed companies, Qatar allows 25 per cent. “This point has been more strongly voiced for the Qatari market as large companies, such as Industries Qatar, have almost reached their foreign ownership limit and became quasi‐uninvestable for foreign investors,” MCSI said.

“Under current conditions the MSCI Qatar Index would not qualify for Emerging Markets on this criterion,” it said clearly.

“A potential reclassification of the MSCI Qatar Index and MSCI UAE Index to Emerging Market status would be implemented in the MSCI Indices at the earliest as part of the November 2012 Semi‐Annual Index Review,” it noted.

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