MSCI postpones reclassification of Qatar and UAE

ClassificationMSCI once again postponed the decision on whether to upgrade Qatar and the United Arab Emirates from frontier to emerging markets.

Investors had hoped the two countries would be reclassified, a move that could stimulate inflows and trading activity in these markets.

In a statement, the index provider says the postponement will “give additional time for market participants to assess the effectiveness of these models for the regulators and the stock exchanges to address the remaining concerns raised by international institutional investors”.

MSCI says investors in the United Arab Emirates continue to stress “significant concerns” over the effectiveness of the new delivery versus payment model when it comes to safeguarding their assets under certain circumstances, especially during failed trades when a forced sale of assets remains a possibility.

Qatar, on the other hand, has been criticised by MSCI for its “stringent” foreign ownership limits, including on large companies. These remain a major concern to international investors, the statement continues, because the availability of shares is both limited and volatile.

Both countries will remain under review for potential reclassification to emerging markets as part of the 2012 Annual Market Classification Review, which is scheduled for next June.

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