x Abu Dhabi, UAESaturday 20 January 2018

Sign of the times: UAE and Qatar to outweigh Greece on MSCI index

Greece has become the first "developed" market to be downgraded to the MSCI Emerging Market index, because of the country's debt crisis and economic collapse.

A Qatari keeps an eye on the big board of trading activity at the Doha Securities Exchange. Ryan Carter / The National
A Qatari keeps an eye on the big board of trading activity at the Doha Securities Exchange. Ryan Carter / The National

Greece will become part of the MSCI Emerging Markets Index after failing to qualify for the criteria of a "developed market" in the wake of the country's economic collapse.

MSCI said that Greece, which had been upgraded to "developed" status in May 2001 after the creation of the euro, would be relegated in its index review this November.

"The minimum standards that currently prevail in developed markets reflect continuous market improvements introduced by authorities in other countries over the years," MSCI said in a statement. "However, very few of these improved market practices have been reflected in the Greek market.”

It is the first time that a “developed” market has been cut to “emerging market” status, said Remy Briand, MSCI's managing director and global head of index research, on a conference call with reporters after the announcement.

The move puts the crippled European country alongside fast-growing economies such as India and China.

The UAE and Qatar will also appear in the MSCI Emerging Markets Index from the end of May next year. Both of the Gulf states will have larger weightings in the index than Greece, which will account for 0.3 per cent of the total.

MSCI said Greece is now failing to meet developed market standards on multiple criteria including securities borrowing and lending facilities, short selling and transferability.

The country has only one traded stock that meets the minimum requirements for a developed market exchange, MSCI said. Market liquidity has been hemmed in by the delisting of Coca-Cola Hellenic Bottling Company. The soft drinks giant's local bottling company moved its headquarters to Switzerland and its primary listing to London in October.

Greece’s economic collapse forced it to seek two European Union and IMF bailout packages. The IMF this week published a report documenting the failings of its rescue plan.

The Athens Stock Exchange Index has lost 83 per cent of its value since peaking in late 2007. So far this year it has made a significant rebound as the eurozone crisis eases, gaining 14.6 per cent since the start of 2013.