Rejected: No EM Status For Qatar, UAE
They may be energy-rich OPEC members, but that's not good enough to make the move from frontier market to emerging market in the eyes of MSCI, the firm that makes such decisions. We're talking about Qatar, one of the world's largest natural gas producers, and United Arab Emirates.
Both Middle East countries will remain classified as frontier market nations until at least the middle of next year, MSCI announced in a statement. There had been speculation both countries were poised for an upgrade to emerging markets status.
“With respect to Qatar, stringent foreign ownership limits, including on large companies, remain a major concern to international institutional investors, as the availability of shares to them is not only limited but also potentially very volatile. No change was implemented or announced on this matter by the Qatari regulators during the review period. Any change to the status of the MSCI Qatar Index is conditional upon a meaningful increase of foreign ownership limit levels applied to Qatari companies resulting in increased foreign room,” MSCI said in the statement.
“Regarding the UAE, the feedback received since June 2011 from international institutional investors was very positive on the introduction and seamless functioning of the new DVP model; however, investors continue to stress significant concerns over the effectiveness of this new framework to fully ensure the safeguarding of their assets under certain circumstances. This is in particular the case for failed trades where a forced sale of assets, without the owner's consent, remains a possibility. As a result many international institutional investors and their custodians continue to view the use of a dual account structure as a requirement,” MSCI noted.
So for now, investors have two choices if they want to get Qatar and UAE exposure. The two countries account for 59% of the weight of the WisdomTree Middle East Dividend ETF (Nasdaq: GULF), which has an SEC yield of 6.68%. Qatar and UAE get weights of 22% and 17%, respectively, in the PowerShares MENA Frontier Countries ETF (Nasdaq: PMNA).
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