Dubai: The UAE and Qatar are scheduled to be upgraded to Emerging Markets by the MSCI Global Emerging Market Index by mid-May, a move likely to increase demand for equities and Depository Receipts.
“Inclusion of these two markets in MSCI Emerging Market Index will attract a number of passive funds to these two markets in addition to the active emerging market funds that are already allocating investments to these markets. The new investor demand is going to drive up demand for both locally listed equity and depository receipts,” said Peter Gotke, Managing Director, UK & Ireland and the Middle East.
Analysts expect to see $1.5 billion (Dh5.5 billion) to $2 billion boost in fund flows into the UAE and Qatar markets together over the next 12 to 18 months. Qatar and UAE markets have posted significant gains since the release of the provisional list by MSCI in June 2013.
Higher weighting
With the formal inclusion of these two markets, nearly 30 companies from the UAE and Qatar are expected to be included in the index. “We expect the inclusion of more stocks to also drive a higher weighting of around 1.3 per cent versus 0.95 per cent previously, which in turn should also push more liquidity into the two markets when Qatar and UAE are officially inducted from 2nd of June 2014. Market conditions are turning favourable for foreign investors,” said Aleksandar Stojanovski, Research Analyst at Deutsche Bank.
The first quarter of 2014 witnessed higher liquidity and more stocks revising their foreign ownership limits. In February 2014 alone, four 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.
