Indexing: The final frontier

Chris Wright
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This time last year – and the year before that – a great deal of discussion about Qatar concerned its likely ascent from the MSCI’s frontier index to its emerging markets index. Both Qatar and the UAE had been on MSCI’s watchlist for upgrade to the more senior index, and were widely expected to graduate.

Neither did. But they remain on the watchlist, so as we enter a new year, the debate will liven up again. Will 2013 be the year? And what’s the impact if it makes the step?

In terms of the impact, Euromoney reported in May 2011 estimates that Qatar would take up 62 to 100 basis points of the MSCI Emerging Market Index if included, equating to $2.5 billion to $4 billion of capital coming into Qatar based on the amount of institutional capital that tracks the index, even without counting the emerging markets funds that loosely track it. Those numbers still look about right today.

So what has to change for inclusion this time? MSCI is quite clear about it. "The issue around the very low foreign ownership limit levels imposed on Qatari companies is expected to be the only remaining impediment to the reclassification of the...