Bloomberg News

MSCI Delays Ruling on Raising U.A.E., Qatar to Emerging Markets

June 21, 2011

June 21 (Bloomberg) -- MSCI Inc., whose stock indexes are tracked by investors with about $3 trillion in assets, delayed its decision until December on whether to raise the United Arab Emirates and Qatar to emerging-market status from its frontier classification.

South Korea and Taiwan remained emerging markets instead of getting upgrades to developed markets, MSCI said in a statement today. The two countries, Asia’s biggest emerging markets after China and India, will be evaluated again for a shift in 2012.

Introduction of the so-called delivery-versus-payment, a program for completing stock transactions, may help lift U.A.E. and Qatar from their frontier-market rankings. MSCI’s delay of the decision will allow more time for investors to assess the impact of the changes implemented in the two countries, the New York-based index provider said.

“Given that the new delivery-versus-payment models were introduced only in May 2011, few market participants have had the opportunity to make a full assessment,” MSCI said in the statement. “This additional review period will also give more time to the regulators and the stock exchanges to address the remaining concerns.”

The U.A.E. has a stock market valued at about $111.5 billion. Qatar’s QE Index has fallen 6 percent this year. Stocks from South Korea and Taiwan are included in the $7.83 trillion MSCI Emerging Market Index, which is down 3.3 percent this year.

An upgrade of the U.A.E.’s and Qatar is likely to draw more investors as fund managers buy their shares to mirror MSCI’s indexes. Israel’s benchmark TA-25 Index has surged since MSCI announced the country’s promotion to developed market status on June 16, 2009.

For its decision on South Korea and Taiwan, MSCI cited accessibility issues in both markets, in particular the lack of full currency convertibility and the lack of active offshore currency markets, and “rigidity” in the countries’ identification systems.

--With assistance from Zahra Hankir in Dubai, Saeromi Shin in Seoul and Weiyi Lim in Singapore. Editor: Nick Baker

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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