Markets Review: MSCI's upgrade of the UAE to an emerging market has stoked volatility amidst a share rally on the Abu Dhabi Securities Exchange and Dubai Financial Market.
Abu Dhabi and Dubai bourses respond to MSCI upgrade with gains
Abu Dhabi's index jumped 3 per cent at the open, while the Dubai index climbed 2.1 per cent. They pared some of their gains by the second half of the trading session.
"Market participants weren't caught by surprise," said Sebastien Henin, a portfolio manager at The National Investor. "Some people took positive bets before, expecting an upgrade, and now want to book their profits. Some want to save the price movement on the news, while others are wanting to buy on the news. I'm expecting a lot of volatility over the coming weeks."
The news follows a 39.1 per cent rise in the Abu Dhabi Securities Exchange General Index this year and a 47.6 per cent rise in the Dubai Financial Market General Index.
The upgrade will open the door for institutional investors in a market that is skewed towards retail investors, who are known to speculate on small-cap stocks, said Fadi Al Said, the head of investments at ING Investment Management in Dubai.
"It's a good development in the evolution of the UAE markets," Mr Al Said said. It will introduce a new type of investor, the institutional, elevating the quality of participants."
The UAE's upgrade from its current frontier market rank, which will come into effect in May next year, is expected to have a positive net impact on the bourses.
Emaar Properties, which will have the biggest weighting on the emerging markets index, advanced 4.7 per cent at the open. By the close, the shares were up 2.8 per cent.
"Investors would be looking to allocate to companies that might be included in the MSCI Emerging Market Index as part of UAE allocation," said Tariq Qaqish, the head of asset management at Al Mal Capital in Dubai.
Dubai Financial Market Company, the only bourse in the region to sell its shares to the public, rose 2.5 per cent to Dh1.98.
The Abu Dhabi Securities Exchange General Index closed 2.6 per cent higher to 3,661.09, while the Dubai Financial Market General Index closed 1.5 per cent higher to 2,395.65.