Standard and Poor’s had announced in a statement that it will reclassify Greece’s rating from advanced market to emerging market, whereas it will upgrade both the UAE and Qatar from frontier markets to emerging markets. The reclassification will take effect as of September 22, 2014. In October 2013, S&P had announced amending the two countries’ classification following talks and a similar step by S&P’s competitor, global markets index provider MSCI.

This upgrade by both S&P and MSCI will lead to more stability in the two Gulf countries’ equity markets as it will prompt greater long-term capital inflows from foreign investors. S&P revealed that Qatar would carry weights of 0.9% of the S&P emerging markets BMI index while the UAE would have 1.0%.

Commenting on the upgrade to Gulf News, Rami Sidani, head of investments in Middle East at Schroders said “It is positive; it will put our market on the radar of global investors and secure liquidity for our market. We are already seeing a substantial increase in daily liquidity.” Schroders manages a portfolio of $2 billion (AED 7.3 billion).

It is worth highlighting that the nine companies in the UAE’s index are: Abu Dhabi Commercial Bank (ADCB), Aldar Properties, Arabtec Holding, DP World, Dubai Financial Market (DFM), Dubai Islamic Bank (DIB), Emaar Properties, First Gulf Bank (FGB) and National Bank of Abu Dhabi (NBAD).

Qatar Exchange’s (QE) Masraf Al Rayan is considered overvalued, while NBAD stocks have corrected sufficiently, Jaap Meijer, Executive director at Arqaam Capital said, adding that Masraf Al Rayan is QE’s third-largest weighted stock on the index.

Meanwhile, in the UAE, the Dubai Financial Market has nearly doubled in the past year, while Abu Dhabi Securities Exchange’s (ADX) main index has gained more than 43.68%.

All three indices closed in the red on Sunday, September 21 amid high anticipation for S&P’s upgrade announcement. The UAE’s ADX and DFM indices retreated by 1.12% and 0.19%, respectively. ADX ended the first session of the week below the level of 5200 pts. Meanwhile, QE’s index dropped 1.49% to 14136 pts, shedding 214.3 pts.