Qatar’s listed companies need to “step up their investor relations and demonstrate greater transparency” as they are on global investors’ radar as Morgan Stanley Capital International (MSCI) has accorded emerging markets status to the country, a report has shown.
According to state-owned Abu Dhabi Investment Company (Invest AD) the move may give market regulators an incentive to “push for higher standards of corporate governance and disclosure.”
Years of efforts by the UAE and Qatar finally paid off last month when both countries were given emerging markets (EM) status by MSCI – a decision that puts the markets on the radar screens of large global investors.
MSCI first considered the markets for an upgrade from frontier status in 2008 but the move did not go through for five annual reviews, in which the agency assessed several issues, including market technology and mechanisms, liquidity and levels of foreign investor participation.
“While the upgrades are unlikely to have a significant near-term impact on the way asset managers allocate to the markets, there is likely to be long-term benefit for the UAE and Qatar. MSCI’s decision is a reflection of greater maturity in the markets, lends legitimacy to them, and in the long run should lead to global institutional investors taking larger, long-term positions. More liquidity in the markets should draw more investors, thereby starting a virtuous cycle,” said Sachin Mohindra, portfolio manager with Invest AD SICAV GCC Focus Fund.
Once both these countries are formally included in the MSCI Emerging Market Index in May 2014, new institutional investment flows could find its way into these markets from emerging markets and global index trackers even if one assumes a neutral weighting for the region.
Mohindra said Qatar might see a bigger impact in coming years because, unlike the UAE, the market was not previously included in the FTSE Emerging Markets Index, which is tracked by some major passive investors. The MSCI decision is likely to lead to a similar move by FTSE.
Qatar has also been an underperformer compared to other regional markets over the last year and, with many stocks now attractively valued, the MSCI decision could prove to be a catalyst for a long-term rally.
“Greater market liquidity could also open up the dormant IPO market, and we may even see companies from neighbouring countries start to consider listing in the UAE and Qatar as a way of tapping global emerging market investors,” Mohindra said.
With the UAE and Qatar no longer featuring in the MSCI Frontier Markets index, Kuwait and Nigeria will now be the “big fish in the small pond”, he said.
Source: Caye Global News, Gulf Times
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