Regulators and investors welcome MSCI upgrade in UAE

Published June 13th, 2013 - 09:35 GMT
Morgan Stanley Capital International UAE
Morgan Stanley Capital International UAE

Officials and investors hailed the MSCI (Morgan Stanley Capital International) decision to elevate the UAE to emerging market status from frontier market and said it would lead to greater international capital flows into the country’s markets.

Sultan Bin Saeed Al Mansouri, UAE’s Minister of Economy and chairman of the capital markets regulator Securities and Commodities Authority (SCA), said the upgrade would reflect positively on the markets and give them a major push, taking them to a new era of development and international attraction.

“I expect the decision to reflect a value addition to the local markets and a giant stride forward as it certifies that the UAE had met all the requirements of the international agency to deserve this status on its index,” said Al Mansouri.

“This, hopefully, will boost internal liquidity in the UAE market, enhance confidence and give greater depth to the market in the medium and long term, giving it more power and boosting its competitive status at the international level,” he added.

Al Mansouri added that the upgrade would make the UAE attractive to international credit rating agencies.

Immediate advantage

“The immediate advantage is that such an upgrade will make more investors around the world — even if they are not associated with this index — to pay attention to the advantages of the UAE capital markets and consider investing in them,” said Abdullah Al Turifi, SCA’s chief executive officer.

The effective date of inclusion of the UAE index on the MSCI is by the end of May, 2014.

Walid Al Hayeck, head of asset management at The National Investor (TNI), told Gulf News that the MSCI elevation is a huge step in the right direction and marks a “paradigm shift” as the quality of trade flow on the UAE markets is going to improve drastically.

“We could see more companies being listed on the local markets. We are going to see more global institutional money targeting local equities,” said Al Hayeck.

Kareem Al Solh, chief executive officer of Abu Dhabi-based Gulf Capital, told Gulf News that the MSCI upgrade would enable global asset managers to maintain an exposure to the UAE markets which would attract global liquidity to the local stock exchanges and ensure sustainable liquidity.

Cautionary note

However, London-based Capital Economics struck a cautionary note on the MSCI upgrade.

“Financial markets have reacted positively to the news that MSCI has upgraded Qatar and the UAE to emerging market status. But we fear that the eventual benefit may be lower than some seem to expect,” it said in a research note.

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