MSCI blames regulators for second upgrade delay

12 Jan 2012

Emerging market status is in the hands of the UAE and Qatar regulators, MSCI has claimed. The global index provider has cited poor implementation of new regulations as the main reason for its decision to delay UAE and Qatar reclassification for a second time.

In December, the firm announced that it would revisit its decision in June 2012. But in an interview with Mena FM, Remy Briand, managing director and global head of index and ESG research at MSCI, said that a  positive decision depended on the markets’ ability to implement regulations on securities lending and borrowing, as well as issues such as DvP and foreign ownership. “(The markets must) not only implement the regulation but test it live,” he said. “And there is not a lot of time between now and June to do that. It’s totally in the hands of the regulator.”

Failure to win emerging market status for the second time has not surprised local fund managers. Walid Hayeck, head of asset management at The National Investor told Mena FM that it was “an expected decision”.

“There were still some issues with the application of the DvP in the UAE market and in Qatar broadly. The market knew that the limits on foreign ownership was a hurdle standing in the way of inclusion of Qatar in the index,” added Hayeck.

The two markets now have another six months to demonstrate that they have successfully implemented all the procedures required by MSCI. Briand added that there is “good momentum” in both markets, but said: “The UAE is in a stronger position than Qatar”.

Hayeck also added that he was more positive on a UAE upgrade. “We don’t know what the Qatari authorities have in mind as an intention to open up or not open up foreign ownership limits,” he said. “But as far as the UAE goes, I can safely be positive this time on the inclusion.”