DOHA: The global index compiler MSCI is expected to finalise the constituent list for Qatar and UAE in their May Semi-Annual Index Review (SAIR) and an official announcement can be expected on May 14, 2014, a Deutsche Bank analyst said yesterday.
When Qatar and UAE will be officially inducted into the MSCI EM index, more funds will flow into the market because these markets will then come under the purview of passively managed funds that track the EM index.
Aleksandar Stojanovski, Research Analyst at Deutsche Bank said: “Market conditions are turning favourable for foreign investors.”
The first quarter of 2014 witnessed higher liquidity and more stocks revising their Foreign Ownership Limits (FOL), the two key impediments to foreigners investing in the region.
“Liquidity in Mena markets is on an upward trend, with 2014 YTD average daily trading volume for UAE at $700m, a 10-year high, and Qatar at $185m, near its 2008 peak. Companies have also begun to look favourably at foreign ownership and some have increased their FOLs”, Stojanovski added.
Deutsche Bank expects that the final list will have more stocks included than the 17-stock provisional list released last year.
In addition to the 17 stocks that MSCI included in the Qatar (9 stock) and UAE (8 stocks) provisional list, released in June 2013, Deutsche Bank estimates that today, up to 10 additional names meet the MSCI EM inclusion criteria.
Among the 27 selected stocks, 17 stocks witnessed increased foreign ownership since June 2013. Since June 2013, Qatar has outperformed the MSCI EM index by 17 percent and UAE by 57 percent.
Deutsche Bank’s research team believes that this re-rating in relative market capitalisation will push up their weights in the EM index once the final list of constituents is announced. With the increased market focus that comes with EM status, Qatar and UAE are able to attract strong foreign fund inflows.
The two countries led the region in fund inflows last year, bringing in a total of $1.8bn, of which Qatar received $848m while the UAE had $954m of inflows.
The Peninsula
