The UAE and Qatar will not be upgraded to emerging markets status by MSCI, the international index provider said.
The inclusion of the UAE and Qatar into MSCI’s emerging markets indexes was expected to have brought billions of dollars of investments into their stock markets.
For the UAE’s part, the index provider cited the so-called trade settlement system as its main concern, while Qatar’s low foreign investment ownership limits continue to deter institutional investors.
The UAE “meets all requirements besides specific market accessibility issues related to custody and clearing and settlement,” MSCI said. “The regulator, the Dubai Financial Market and the Abu Dhabi Securities Exchange have taken the decision to delay the implementation of a proper false trade mechanism.”
The UAE in November introduced a so-called delivery versus payment system, where cash is paid at the same time when securities are delivered.Traders have highlighted concerns related to glitches in the UAE's trading system.
Qatar, meanwhile, has “not yet addressed the specific issue around the very low FOL levels,” MSCI said.
“This issue has been put forward as the major impediment to a potential reclassification to Emerging Markets for international institutional investors as it significantly limits the number of shares available to them.” The index provider also said it is yet to test Qatar’s newly introduced trade settlement system.
The two Gulf countries, and their stock-markets will remain classified as frontier markets. The next review will be in one year, MSCI said.MSCI also downgraded Morocco to frontier markets status from emerging markets status.
“The MSCI Morocco Index is more in line with the size and liquidity requirements of Frontier Markets following a significant decrease in liquidity since 2008, which resulted in a simultaneous decrease in the number of constituents in the MSCI Morocco Index,” the provider said.
“The MSCI Morocco Index has only three constituents, of which Maroc Telecom had its weight reduced by 50 per cent due to low liquidity.”