UAE Ready For MSCI Upgrade – Expert

Bourses across the UAE, in both Dubai and Abu Dhabi, have posted strong performances in the last year, and experts are now optimistic that the country is ready to be upgraded to the emerging market status by index compiler MSCI.

“I am confident at this juncture that the UAE and Qatar will be upgraded to Emerging Markets status by the MSCI this June, with affirmative action taking place across regional markets,” said Peter Gotke, vice president and head of GCC Depositary Receipts at BNY Mellon.

“It remains a priority that both the UAE and Qatar continue to attract institutional foreign investment to provide enhanced stability for region,” he said.

Standards of investor relations and corporate governance have increased in the region, and liquidity is on the rise. And with Dubai’s economy improving, the emirate’s stock market has risen over 45 per cent this year, making it one of the best performing market across the world.

While the UAE has been attempting to get an upgrade up from the frontier market status since 2009, it has repeatedly been rejected by MSCI.

“With more and more foreign investors looking to buy and sell in the UAE, clearly the newly implemented delivery versus payment (DVP) system, introduced as part of the MSCI criteria, has now been fully tested,” said Gotke.

“The UAE could also see a potential increase in international investment should plans for the new investment law, which contains legislation allowing foreigners full ownership of companies in industries that could potentially benefit the country’s economy, be passed before the year-end.

“It is likely that the UAE would attract significant capital flows in additional foreign investment, should it be upgraded to emerging market status.”

Qatar is also hoping to make the upgrade this year, with Doha’s stock market growing steadily over the past year.

“Fundamentals in Qatar remain very strong with numerous infrastructure contracts supporting its growth. Of course, investors would like to see increased foreign ownership limits and opportunities to buy into the resource sector but it is unclear if this is scheduled to change,” said Gotke.

“If the UAE and Qatar are successful in their bid to become emerging markets then it is estimated that they will see an increase in foreign investment inflows of up to $3 billion.

“However the impact would be much more gradual than a sudden turning on of a tap. More important, perhaps, would be the impact on sentiment, both for retail investors and for foreign investors,” he added.