Abu Dhabi bourse 'positive' about UAE upgrade at MSCI

UAE's bourses have met most requirements for upgrade to emerging market status, official says
Abu Dhabi bourse 'positive' about UAE upgrade at MSCI
Dubai stock exchange
By Bloomberg
Sun 10 Apr 2011 03:51 PM

The Abu Dhabi Securities Exchange is "positive" about MSCI Inc upgrading the UAE’s bourses to emerging market status this year, said Rashed Al Baloushi, deputy chief executive officer.

The country’s bourses have met most requirements for the MSCI upgrade and the so-called delivery-versus-payment remains the main criteria to be implemented, Al Baloushi said in a telephone interview on Sunday. Abu Dhabi’s exchange is coordinating with the Dubai Financial Market to implement DvP, he said.

MSCI classifies six of the Gulf’s seven bourses, including those in the UAE and Qatar, as frontier markets, a designation that typically applies to economies and financial markets that are less developed than emerging markets. Saudi Arabia’s market is not categorized. MSCI indexes are tracked by investors with an estimated $5.2 trillion in assets, according to a May 26 report by Shinhan Investment Corp.

"Widespread skepticism abounds concerning DFM and ADX readiness to implement DvP," said Julian Bruce, equity sales head at EFG-Hermes Holding in Dubai. There is no major "cause for concern yet; this sort of development is always undertaken on an eleventh-hour basis and I don’t expect this time to be any different," he said.

MSCI in June cited a dual account structure as one of the reasons for frontier market status of the U.A.E., and kept the country under review for reclassification. The index provider will in June revalue its assessment by examining, among others, economic development, trading volumes and market accessibility.

Dubai’s bourse, the only Gulf Arab stock market to sell shares to the public, said January 31 it would move to DvP in the first quarter to boost its chances for inclusion in the MSCI EM Index. Dubai plans to introduce short-selling as well as securities borrowing and lending later this year, it said.

Qatar Exchange said last month it will move to DvP on April 11 and the first settlement under the new rules will be on April 14. The bourse said it is also looking into "direct market access through sponsored access, securities lending and borrowing, margin trading and covered short selling."

Delivery versus payment is a securities industry procedure in which payment for a security must be made when the security is delivered. Usually, the payment is made to a bank, which in turn pays for the security. Short sellers borrow and sell an asset, hoping to profit by buying it back later for less.

Dubai’s measure has fallen 3.7 percent so far this year and Abu Dhabi’s ADX General Index has retreated 4.1 percent. That compares with a 4.7 percent gain in the MSCI ME Index.

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