Investment set to flood in as UAE, Qatar win ‘emerging market’ status

The UAE and Qatar have been upgraded to emerging-market status by MSCI, in a long-awaited move forecast to see about $800 million of investment flow into the two countries.

MSCI, which allocates classifications according to factors like economic development and bourse trading volumes, reclassified the two countries' markets late last night.

The countries were previously classed as frontier markets, but had long expected to win upgrades. The reclassification is expected to take effect in May 2014.

MSCI praised the improvements made in trading mechanisms in Qatar, as well as the “progress made to date and the further commitment of the Qatari authorities to increase the foreign ownership limit” on shares in Qatari companies.

“Foreign ownership limits in Qatar remain low by emerging market standards and the Qatari authorities should actively continue to increase them above 25 percent in order to mitigate potential issues arising from increasing foreign capital inflows,” MSCI said.

MSCI also praised improvements in trading mechanisms in the UAE’s Dubai Financial Market and Abu Dhabi Securities Exchange.

HSBC forecast last month that a reclassification to emerging-market status could see an additional $370 million flowing into the UAE and more than $430 million into Qatar.

Morocco and Greece were downgraded in MSCI’s review, the latter from an emerging market to frontier.

“The MSCI Morocco Index has failed the emerging market liquidity criteria for several years and this downward trend in liquidity has shown no sign of reversal,” MSCI said.

MSCI said it is wary of the situation in Egypt. It “is closely monitoring the situation in Egypt, in particular the negative developments in the foreign exchange market. MSCI may launch a public consultation on a potential exclusion of the MSCI Egypt Index from the MSCI Emerging Markets Index were the situation to worsen in the coming months,” it said in a statement.