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Morgan Stanley to declare UAE and Qatar "Emerging Markets" - ASHARQ AL-AWSAT English Archive
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An investor monitors an electronic board displaying stock information at the Dubai Financial Market June 13, 2013. REUTERS/Ahmed Jadallah

An investor monitors an electronic board displaying stock information at the Dubai Financial Market on June 13, 2013. (REUTERS/Ahmed Jadallah)

Cairo, Asharq Al-Awsat—The United Arab Emirates and Qatar have been reclassified by New York’s Morgan Stanley Capital International (MSCI) as “Emerging Markets,” in a move experts say could boost investment in both states.

The announcement resulted in a boost in trading in both markets. The Abu Dhabi market finished trading yesterday up 2.65%, closing at 3661.09 points. The Dubai market index, meanwhile, rose 1.59%, closing at 2395.65 points. Doha’s market was the strongest, however, with its index recording the highest level in five years, a rise of 1.75%, to close at 9517.95 points.

Morgan Stanley issued a statement saying that the reclassification of Qatar and the UAE’s indices will coincide with the half-yearly revision of indices in May 2014.

A report by Global Investment House, a Kuwaiti financial services company, said the upgrade of the UAE and Qatar markets was due to steps taken by both markets to gain the confidence of international investors.

The report said these markets will join the index in May 2014 because of the positive developments in their infrastructures. Both the UAE and Qatar have improved their delivery versus payment systems (DVP), which allows an investor to be paid cash compensation in the event of securities being unavailable for delivery on settlement date.

The report added that the upgrade in classification to Emerging Markets will help boost liquidity and attract investors to the region. As soon as the UAE and Qatar are officially upgraded, the report continued, large sums of money will flow into the markets, most likely from companies looking for long-term investments.

The report does not expects foreign funds which follow the Morgan Stanley Index (MSCI) to begin investing their capital until the reclassification has been officially completed in May 2014.

In another development, the Egyptian stock market index has plummeted due to the uncertainty surrounding the political situation in the country. The uncertainty was worsened by Morgan Stanley’s threat to exclude Egypt from the Emerging Markets Index.

Morgan Stanley said yesterday that it was closely monitoring the situation in Egypt, and that it may start consultations to remove Egypt from the Emerging Markets Index.

The Egyptian Stock Market lost USD 1.9 billion yesterday, after a day of heavy selling by local investors.

The main stock index, EGX30 hit an 11-month low when it dropped by 5.17% to close at 4598.10, while the medium companies index, EGX70, dropped by 4.57%, closing at 352.46 points.

Muhsen Adel, deputy head of the Egyptian Association for Funding and Investment, said the report–in its decision to monitor the situation in Egypt–depended on the situation at the Egyptian foreign exchange market and problems facing foreign investors, not factors related to the Egypt Stock Exchange, its performance, or its operational systems.