UAE indices' upgrade to attract more foreign funds
Dubai, March 24, 2014
The UAE's upgradation to “Emerging Market” in May by Morgan Stanley will significantly attract huge inflows into the country's financial markets, said an expert.
This major upgrade will significantly boost the financial standing of both markets - Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) - that took major steps that were noticed by international rating agencies, stated Fortress Investments, a leading investment firm operating in the Middle East.
Morgan Stanley Capital International (MSCI), a leading provider of investment decision support tools worldwide, had last year announced its decision to upgrade the MSCI Qatar and MSCI UAE indices from Frontier Markets to Emerging Markets.
“UAE financial markets will join the index in May 2014, thanks to the international benchmarking procedures adopted by the UAE and the stringent measures of transparency introduced in the country’s financial sector,” remarked Hamed Mokhtar, the managing director at Fortress Investments.
“This upgrade will help boost liquidity and attract more investors to the country, as UAE serves as the financial hub of the Mena region,” he added.
According to him, there will be significant inflows of capital into the UAE markets from international investors immediately after the actual upgrade in May.
"Foreign funds which follow the MSCI Index will consider investing their capital in the UAE from that period onwards," he noted.
Mokhtar pointed out that the UAE had improved its delivery versus payment systems (DVP), which allow an investor to be paid cash compensation in the event of securities being unavailable for delivery on settlement date.
"This upgrade reinforces our trust in the UAE’s economy, which is based on a solid foundation," he stated.
Apart from the MSCI reclassification of the UAE financial market, others like Standard and Poor’s (S&P) and Dow Jones have also upgraded the status of the Emirates Securities Markets (ESM) from ‘Frontier’ to ‘Emerging Market’ last November.”
“Dubai’s benchmark index was regarded the world’s best-performing stock recently and the expected merger between ADX and DFM will benefit investors and attract new ones,” he added.
Mokhtar said SCA, in collaboration with ADX and DFM, offers an ideal investment environment and advanced legislations matching the expectations of local and foreign investors.
"We expect higher volumes in the daily trading at ADX and DFM in the coming period," he noted.
Mokhtar said the financial market in the UAE was set for further growth driven by the country’s economic prosperity and legal framework.
"Moreover, the UAE has inspired significant confidence in its economy among the international community, and we believe that international investors will help the region achieve substantial growth and expansion in the years to come," observed Mokhtar.
"With this expected boost in the UAE’s financial sector, there will be a greater need for financial advisors to provide clients with a clearer investment direction and a more active wealth management approach to match this uniquely dynamic economic environment," he added.-TradeArabia News Service