Gulf unlikely to suffer from MSCI snub

Index compiler MSCI's decision not to upgrade three Gulf countries to emerging market status came as no surprise and will not affect stocks in the short term, but will deter major funds from investing, analysts said. MSCI yesterday said that it would not include Qatar, the UAE and Kuwait in its emerging markets benchmark. For Qatar and the UAE, it cited the lack of formal segregation between custody and trading accounts and to a lesser extent foreign ownership restrictions. Qatar and the UAE will remain under review for a possible upgrade, but MSCI is no longer considering raising Kuwait's status because of its market accessibility restrictions. "This news was already priced into stocks – most of the analysts were saying this was going to happen," said Matthew Wake?man, EFG-Hermes Managing Director for Cash and Equity-linked Trading. "An upgrade would have given a huge upside potential, but no upgrade will have very little impact." Ali Khan, Managing Director and Head of Brokerage at Dubai's Arqaam Capital, also said MSCI's decision was not a surprise. "I doubt the market will react negatively to MSCI's decision – the consultation process was very open," said Khan. "It's very clear from the guidance MSCI has given that the measures needed for the UAE and Qatar to be upgraded are achievable." However, the Gulf's continued absence from the MSCI Emerging Market Index is likely to be negative in the long-term because its is the benchmark against which fund managers performance in non-developed markets are measured. The fund managers allocate up to 90 per cent of their portfolios in line with index weightages, with the remainder underweight or overweight. Keep up with the latest business news from the region with the daily Emirates Business 24|7 newsletter. To subscribe to the newsletter, please click here .