High hopes for UAE, Qatar market status upgrade

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Dubai walkAfter five years in a row of missed opportunities, the UAE and Qatar are under consideration for a reclassification from their current frontier market status to that of emerging market. Morgan Stanley Capital International, a global provider of investment services whose indices are tracked by investors that manage approximately $7 trillion, said in 2012 that foreign ownership limits in Qatar and operational framework in the UAE needed to be revised.

In recent weeks, however, T. Rowe Price Group Inc and HSBC Holdings have both made bullish arguments in favour of an upgrade to emerging market status for both countries.

“Both the UAE and Qatar are in a better position and meet more of the criteria than other countries that have been upgraded before,” Oliver Bell, a money manager for T. Rowe Price’s Africa & Middle East Fund, said in an interview with Bloomberg on May 22.

“I see no reason why they shouldn’t be upgraded and don’t understand why they haven’t been upgraded previously.”

A research report published by HSBC said that the UAE and Qatar have improved their delivery-versus-payment systems and now include a buyer-cash-compensation procedure, where a buyer of a security is paid in cash if that security is not available for delivery on the specified settlement day.

HSBC analysts Vijay Sumon and Joaquim de Lima said in a report dated May 31 that “an upgrade will potentially result in access to a larger pool of investments.”  According to the analysts, an upgrade to emerging market status could bring more than $430 million in investments to Qatar and about $370 million to the UAE.

Investors believe the UAE will likely be awarded emerging market status as economic fundamentals have improved and the real estate market has rebounded, these factors have helped boost the Dubai Financial Market General Index over 50 per cent so far in 2013.

Foreign ownership caps are the main obstacle to an upgrade, Citigroup analyst Maria Gratsova said in a report dated June 5.  Although Qatar has improved foreign ownership limits to 25 per cent, there are concerns the limit may still be too low.  UAE foreign ownership limits are not seen as an issue because most companies have a cap at 49 per cent.

Qatar’s two biggest banks, the Commercial Bank of Qatar and Qatar Islamic Bank, requested on June 5 for the Qatar Exchange to increase the number of shares available to foreign investors.

“The increase in the number of shares available to foreign investors significantly opens up the market in Qatar,” the Qatar Exchange cited Finance Minister Yousef Hussain Kamal in an e-mail statement to Bloomberg on June 5.  “This affirms the commitment of the government to transform Qatar into a regional investment hub.”

Qatar is “making extensive efforts to provide an investment environment that is more attractive for foreign investors to direct their investments towards the Qatari market,” Kamal said in the statement.

MSCI will release their annual market classification review on June 11, 2013.

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Reading Time: 2 minutes

After five years in a row of missed opportunities, the UAE and Qatar are under consideration for a reclassification from their current frontier market status to that of emerging market. Morgan Stanley Capital International, a global provider of investment services whose indices are tracked by investors that manage approximately $7 trillion, said in 2012 that foreign ownership limits in Qatar and operational framework in the UAE needed to be revised.

Reading Time: 2 minutes

Dubai walkAfter five years in a row of missed opportunities, the UAE and Qatar are under consideration for a reclassification from their current frontier market status to that of emerging market. Morgan Stanley Capital International, a global provider of investment services whose indices are tracked by investors that manage approximately $7 trillion, said in 2012 that foreign ownership limits in Qatar and operational framework in the UAE needed to be revised.

In recent weeks, however, T. Rowe Price Group Inc and HSBC Holdings have both made bullish arguments in favour of an upgrade to emerging market status for both countries.

“Both the UAE and Qatar are in a better position and meet more of the criteria than other countries that have been upgraded before,” Oliver Bell, a money manager for T. Rowe Price’s Africa & Middle East Fund, said in an interview with Bloomberg on May 22.

“I see no reason why they shouldn’t be upgraded and don’t understand why they haven’t been upgraded previously.”

A research report published by HSBC said that the UAE and Qatar have improved their delivery-versus-payment systems and now include a buyer-cash-compensation procedure, where a buyer of a security is paid in cash if that security is not available for delivery on the specified settlement day.

HSBC analysts Vijay Sumon and Joaquim de Lima said in a report dated May 31 that “an upgrade will potentially result in access to a larger pool of investments.”  According to the analysts, an upgrade to emerging market status could bring more than $430 million in investments to Qatar and about $370 million to the UAE.

Investors believe the UAE will likely be awarded emerging market status as economic fundamentals have improved and the real estate market has rebounded, these factors have helped boost the Dubai Financial Market General Index over 50 per cent so far in 2013.

Foreign ownership caps are the main obstacle to an upgrade, Citigroup analyst Maria Gratsova said in a report dated June 5.  Although Qatar has improved foreign ownership limits to 25 per cent, there are concerns the limit may still be too low.  UAE foreign ownership limits are not seen as an issue because most companies have a cap at 49 per cent.

Qatar’s two biggest banks, the Commercial Bank of Qatar and Qatar Islamic Bank, requested on June 5 for the Qatar Exchange to increase the number of shares available to foreign investors.

“The increase in the number of shares available to foreign investors significantly opens up the market in Qatar,” the Qatar Exchange cited Finance Minister Yousef Hussain Kamal in an e-mail statement to Bloomberg on June 5.  “This affirms the commitment of the government to transform Qatar into a regional investment hub.”

Qatar is “making extensive efforts to provide an investment environment that is more attractive for foreign investors to direct their investments towards the Qatari market,” Kamal said in the statement.

MSCI will release their annual market classification review on June 11, 2013.

Converse with the author on Twitter 

Other posts by this author:
http://investvine.com/foreign-investors-flock-to-vietnam-stocks

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