MENA Asset Management Survey 2012 - National Bank of Abu Dhabi

Benchmarks
Qatar and United Arab Emirates
In June 2012, MSCI announced that the MSCI Qatar Index would remain
under review for a potential reclassification to Emerging Markets as part of the
2013 annual market classification review. MSCI cited very low foreign
ownership limit levels as the only remaining impediment to the inclusion of the
MSCI Qatar Index to Emerging Markets. MSCI also announced that MSCI
UAE Index would remain under review for a potential reclassification to
Emerging Markets as part of the 2013 annual market classification review.
MSCI cited a delay in the implementation of a proper false trade mechanism.
A review of MSCI announcements from previous years indicates that the
points raised as remaining impediments to inclusion of UAE in the Emerging
Markets Index has changed over time. Consistency in terms of the application
of criteria to constituent countries in the Emerging Markets Index has also
come under scrutiny (MSCI announced intent to reclassify Morocco in June
2012).
In August 2011, Russell Investments announced that the UAE had become the
first and only GCC country to obtain the emerging market status within the
Russell Global Index series. Russell announced that although the UAE was
currently the only GCC economy to be included in its Emerging Markets
indices, Qatar met most of the rules-based criteria for the same classification.
It noted that the principle factor in why Qatar remains a Frontier economy was
that regulations in the country stipulate a 25 per cent foreign ownership limit on
Qatari companies -- which limits investment opportunities and the likelihood of
allocations to Qatari stocks within emerging markets portfolios.
In June 2011, MSCI extended the review period by 6 months for the potential
reclassification of the MSCI Qatar and UAE indices from frontier market to
emerging market status to give more time to market participants to assess the
impact of the enhancements implemented earlier in the year on the two
markets.
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