MSCI, the index provider, will promote UAE and Qatar from frontier market to emerging markets in a long-awaited move that could significantly raise investment flows to the Gulf region.
The index provider says the authorities in both countries have improved their delivery-versus-payment (DVP) models and introduced mechanisms for dealing with false trades. Although foreign ownership limits remain low in Qatar, MSCI says the country has made progress in increasing them.
The reclassification, planned for May 2014, could bring $430 million (€323 million) into the Qatar market and $370 million into the UAE, according to estimates from HSBC published last month.
In the same announcement, the index provider says it will relegate Greece from developed market to emerging market status. MSCI says its Greek index fails to meet criteria including securities borrowing and lending facilities, short selling and transferability.
The index provider adds that the Greek index “has not met the developed market criterion for size for the last two years”.
Morocco was also relegated, from emerging market to frontier market status, having failed MSCI's liquidity criteria for emerging markets for a number of years. Greece and Morocco will be downgraded in November of this year, says MSCI.
Launched in 1988, the MSCI Emerging Markets Indices include 13% of the global equity opportunity set, according to the company.
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