Gulf markets traded sideways yesterday amid a lack of local catalysts to boost buying.
The Abu Dhabi Securities Exchange (ADX) General Index slipped 0.5 per cent to 2,716.72, while the Dubai Financial Market (DFM) General Index was down 0.7 per cent at 1,537.48.
It was the second day of trading since the index provider MSCI surprised investors by delaying for six months a decision on whether to upgrade the UAE and Qatar to “emerging market” status.
“Both the ADX and DFM were weak due to a convergence of factors: the disappearance of the positive catalyst that would have been the MSCI upgrade, and weaker markets elsewhere,” said Julian Bruce, the director of equity sales at EFG-Hermes in Dubai.
MSCI currently considers the UAE and Qatar to be “frontier” markets, and being upgraded could attract new liquidity to the countries’ bourses and drive index fund investment, which has declined in recent years.
The markets rose significantly in recent months in anticipation of the announcement. Now that the verdict has been delayed, it is difficult to justify any further buying with no drivers in place, Mr Bruce added.
Qatar said this week it was in talks with individual companies to raise foreign ownership limits but was not planning a blanket increase despite MSCI saying the current 25 per cent cap on foreign ownership stands in the way of an upgrade.
Qatar’s index was unchanged at 8,214.35 yesterday.
Oil declined after the US Federal Reserve lowered its economic growth outlook for the country. Brent crude for August delivery dropped to US$107.45 a barrel, the commodity’s first loss after four consecutive days of gains.