Dubai: UK-based index provider FTSE Group said yesterday it has added the UAE as a secondary emerging market within its global equity index series, a move that could boost the international profile of a number of the country's flagship listed companies.

Changes to the UAE's classification will be implemented after the market close yesterday, and take effect at the start of trading on Monday, it said in an emailed statement. The UAE's inclusion was initially announced in the FTSE 2009 annual country classification review.

"The announcement highlights structural improvements made to UAE financial markets and is an important step for the market's global recognition," FTSE Middle East and Africa managing director Jonathan Cooper said in the statement.

Indexes provided by firms like FTSE, MSCI and Dow Jones are used by many international fund managers and portfolio investors as a basis for making their investment decisions.

Investment bank Shuaa Capital said it expects the FTSE action to further add to the recent improvement in sentiment surrounding UAE markets, following a period characterised by significant macroeconomic uncertainty resulting in weak trading volumes, high volatility and depressed market valuations.

Most markets in the Gulf region have struggled to attract foreign investors for various reasons including lack of transparency, small investment limits and small free floats.

Gearing up

However, after lacklustre performances in the past few years many of the region's markets are gearing up to attract more international investors.

Last week, analysts at EFG Hermes said FTSE's decision to upgrade the UAE to secondary emerging market status will have a limited impact on stock markets.

"While FTSE is a widely followed index on a global basis, we believe its following within an emerging markets context is much weaker. In addition, the share of the UAE within the FTSE All World Emerging Market index is likely to be very small — we estimate it could well be less than 0.5 per cent," EFG said.

"At a stretch, some of the larger names included in the index may witness increased trading activity; however, the impact of this should be marginal," the analysts added.

About 20 UAE companies are expected to join the FTSE global equity index series. The index provider didn't however provide a list of the firms.

An indicative constituents list for the UAE, available on the FTSE website, includes names such as DP World, Emaar Properties and First Gulf Bank.