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MSCI selects 19 UAE and Qatar companies for global EM index

MSCI selects 19 UAE and Qatar companies for global EM index
Doha Bank
DHBK
-0.27% 1.49 -0.00
DIB
DIB
0.17% 5.84 0.01
Electricity & Water
QEWS
0.19% 16.23 0.03

ADCB
ADCB
1.45% 8.40 0.12
Ooredoo
ORDS
2.12% 10.60 0.22
Aldar
ALDAR
-1.08% 5.52 -0.06

Barwa
BRES
-0.72% 2.76 -0.02
FGB
FGB
-0.39% 12.90 -0.05
Emaar
EMAAR
-0.49% 8.15 -0.04

DFM
DFM
3.50% 1.48 0.05
QNB
QNBK
-0.07% 14.20 -0.01
DP World
DPW
0.00% 0.00 0.00

QIB
QIBK
-0.26% 19.00 -0.05
Al Rayan
MARK
0.59% 2.37 0.01
Arabtec Holding
ARTC
-3.29% 0.53 -0.02

Industries Qatar
IQCD
-0.17% 11.97 -0.02
Vodafone Qatar
VFQS
0.69% 1.75 0.01
FAB
NBAD
-0.59% 13.40 -0.08

The Commercial Bank
CBQK
-0.50% 4.93 -0.03
By Elsayed Solyman

Index-provider MSCI on Wednesday formalized the reclassification of the UAE and Qatar from Frontier to Emerging Markets and added nine UAE stocks and 10 Qatari stocks to the MSCI Emerging Market Index.

The UAE will have a 0.58 per cent weighting in the index while Qatar will have a 0.47 per cent weighting. The upgrade will be implemented on May 30, 2014.

The much-anticipated boost is expected to pump in approximately USD 1 billion combined in both Qatar and the UAE, which could increase the total inflows into both markets after the upgrade to almost USD 2 billion, Deutsche Bank said in a new note to clients issued on Wednesday.

About USD 8 trillion is benchmarked to MSCI indexes. The emerging markets index is up 2.9 per cent so far this year, while the all world index has risen 2.1 per cent.

Last June, MSCI announced that it would be reclassifying Qatar and the UAE as emerging rather than frontier markets starting the end of May 2014. Ever since the initial announcement, both countries’ markets have witnessed a big increase in volumes and turnover.

The UAE sought entry to emerging market status in 2008, but was turned down five times due to what MSCI cited as a lack of market transparency and investor protection.

Companies

According to MSCI, the nine listed Emirati companies in the index are: Emaar, Abu Dhabi Commercial Bank, Aldar Properties, Arabtec, DP World, Dubai Financial Market, Dubai Islamic Bank, First Gulf Bank, and National Bank of Abu Dhabi.

As for the 10 Qatari companies, MSCI selected Al Rayan Bank, Barwa Real Estate, Commercial Bank of Qatar, Doha Bank, Ooredoo (telecoms), Qatar Electricity & Water, Qatar Industries, Qatar Islamic Bank, Qatar National Bank, and finally Vodafone Qatar.

Optimism on the rise

Most analysts polled by Mubasher were highly optimistic about the upgrade’s effect in the long run; however, some expressed concern by citing the weak components of both markets in the index, as well as foreign ownership limits.

“It is high time to a new stage for both markets. As soon as the upgrade will take effect, we will see a leap in both values and volumes, with certain stocks likely lead gains, especially Emaar,” said Nabil Hyder, head of Gulf Research at Al Madina Investment.

Official data from the index-provider says the MSCI Frontier index attracts USD 2.7 billion worth of funds, while MSCI Emerging tracks some USD 1.4 trillion.

“I think the short term effect on how both markets will react to the upgrade will not reach the set expectations, as most active fund managers who track the index are currently present in the markets. However, the long-run effect is projected to be highly positive, as passive fund managers will inject new cash,” said Rami Sidani, head of Gulf Research at Schroeders.

“It should prove to be supportive, as some funds are only seeking to invest once the two countries are part of the MSCI Emerging markets index,” he added.

Another point of view has raised concerns about the accessibility of these markets to the foreign cash inflows.

“After the upgrade will take effect, accessibility is still a concern although foreign ownership limits nave been raised; but I think it is not enough to attract big cash flows,” said Anita Gupta, Equity Strategist at Emirates NBD.

Starting 2014, companies such as Dubai Islamic Bank, Deyaar, Mashreq Bank, Union Properties and Al Khaliji Bank have announced their decision to increase their respective foreign ownership limits.

“On average, foreign investors represent 40 per cent of trading value and their ownership of the total DFM market capitalization [USD 95 billion] has increased from 12 to 18 per cent over the past 12 months,” Wall Street Journal quoted Dubai Financial Market Chairman Essa Kazim as saying on Wednesday.

Edited by Stephanie Nehme