MSCI decision fails to sway Gulf investors
DUBAI/CAIRO GULF bourses ended mixed in a muted session on Thursday that saw investors little moved by index compiler MSCI’s decision to keep frontier market status for the UAE and Qatar, while Egypt’s bourse resumed its decline on political woes.
This was the fourth time Qatar and UAE failed to obtain emerging market status, an upgrade which could attract renewed interest from long-term investors and global fund managers.
For the UAE, MSCI said it meets all the requirements for promotion but there are specific market “accessibility issues” related to custody, clearing and settlement.
Meanwhile, it said the “very low foreign ownership limit levels imposed on Qatari companies is expected to be the only remaining impediment to the reclassification of the MSCI Qatar Index to emerging markets.” MSCI had previously denied both Qatar and the UAE promotions in 2009, 2010 and 2011.
Dubai’s index slipped 0.4 percent, trading within its tight range of 85 points over the past six weeks.
There was little hope of an upgrade to emerging market status and few bets placed ahead of the announcement.
“Things were clear — we knew what the MSCI was looking for and the improvement was minimal,” said Sebastien Henin, portfolio manager at The National Investor.
“It’s a complete non-event right now. The bulk of the investors are already out of the markets.” Bellwether Emaar Properties dropped 1.4 percent and Dubai Financial Market, the only listed Gulf bourse, shed 0.6 percent. These two stocks would have seen funds inflow in case of an emerging market upgrade for the UAE.
Abu Dhabi’s benchmark climbed 0.8 percent, with telecom operator Etisalat the main support. Shares in the firm, available for trading only to UAE nationals, gained 2.4 percent.
In Qatar, the measure lost 0.6 percent, extending year-to-date declines to 6 percent and making it the worstperforming Gulf market. Losers outnumbered gainers 15 to three.
Investors are likely to train their eyes on developments in US and Europe. Rising concern about global growth triggered falls in shares and commodities on Thursday after data showed Chinese and European factory activity slowing, a day after the Federal Reserve extended its stimulus policy due to a weakening US recovery.
“Each time we have strong volatility on international markets, there will be impact on us, but we have been quite resilient,” Henin said. “As long as the situation in Europe doesn’t reach a severe point, I don’t see a major trend change for our markets.
Even if growth in Europe and US is slowing, it should be manageable for us because the domestic story is getting stronger.
Elsewhere, Egypt’s benchmark index resumed its decline after a oneday pause, dropping 1.9 percent on political anxieties after the result announcement of Egypt’s presidential election was postponed over allegations of fraud.
The delay frayed nerves as the Muslim Brotherhood, which claims victory, threatened to take to the streets in protest at moves by the ruling generals to deny them power.
Thousands of protesters gathered in Tahrir Square for a second night on Wednesday to demand that the officers who pushed Mubarak aside keep their word and hand over power to civilians by July 1
The index, which is at 4,032 points, has declined by 17 percent since the presidential election began in May.
“It is political concerns,” said Osama Mourad of Arab Finance Brokerage. “We are still waiting for election results, for Mubarak to die and to see what will happen in Tahrir on Friday.”