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Status symbol: UAE’s transition from frontier to emerging market

Status symbol: UAE’s transition from frontier to emerging market

The UAE is ready to make a change. Will MSCI finally give the country the stamp of approval, asks Emily Lucas.

June 21, 2011 4:13 by

Markets were in a flurry since June 19 in anticipation of whether or not the UAE will be granted with the “emerging markets” status. It’s all up to MSCI on whether the country’s current status as “frontier” will soon be replaced.

The UAE aims to become a stable enough and approachable to international investors rather than being classed as indecisive and risky. Qatar’s fate will also be determined this week.

Percentages increased within The Abu Dhabi Securities Exchange General Index, with a 0.5 percent climb. Meanwhile, The Dubai Financial Market General Index rose to an outstanding 0.7 percent due to the upgrade speculation. Dubai’s shares have risen by 16 percent in value and Abu Dhabi increased by a satisfying 10 percent during March.

Requirements of 49 percent Foreign Direct Investments (FDI) limits Qatar from getting the upgrade as the country is currently immovable at 25 percent. HSBC say that if percentages were raised the UAE and Qatar could receive cash flow of up to $600 million.

Although the UAE agreed to the 49 percent change, many firms within the UAE such as Etisalat do not allow non-UAE involvement.  Qatar however, denied increasing the percentage of their foreign ownership limits decreasing their chances of getting the upgrade.

Today, the markets patiently wait for the answer. Lists of improvements were made in attempts to get the upgrade. In addition, MSCI has also made modifications; raising limits to foreign ownership as well as the amount of shares companies can open to the public.

“All the reasons and excuses MSCI had for not upgrading the country are still there,” said Zin Bekkali, the chief executive of Silk Invest, as reported in The National.

By being given the upgrade, analysts estimate that the UAE is capable of attracting around a hundred million dollars to $1.5 million with new investments and if granted the promotion a heavier weighing of 0.3 percent on MSCI’s emerging market index. Currently, Egypt and Morocco are the only two Middle Eastern countries with the “emerging’ status.

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1 Comment

  1. Dismanirie on June 22, 2011 6:37 am

    Transparency in law and regulation of the equity markets are still major considerations against UAE and Qatar being promoted to emerging market status.

    MSCI rightly categorises both countries as frontier markets because of the higher investor risk associated with legal and regulatory weakness.


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