Qatar prepares to step up to an EM benchmark
Qatar’s accession to the MSCI Emerging Markets index would open it up to new investment inflows and might prompt a liberalization of other equity markets in the region
QATAR IS JUST weeks away from finding out if it will be included in the MSCI Emerging Markets index – a potentially pivotal event for the country’s stock market and for the whole Gulf Cooperation Council region. The Gulf has long been an oddity in index terms: prosperous, developed and resource-rich nations that don’t feature in the main world benchmarks. Finally the anomaly might be about to be corrected.
Gulf markets have been missing for a variety of reasons. Saudi Arabia’s, much the biggest and most liquid, can only be accessed by foreigners through a swap structure, which counts it out of the main indices. Kuwait has accessibility issues too; and most of the rest have been deemed too small, too young, and are often restricted as well.
But last year MSCI indicated that things might be about to change. The index provider reconsiders where countries fit in its indices once a year in its annual market classification review, completed at the end of May and announced in June; any changes then take effect a year later, giving markets and fund managers time to adjust. Last year, MSCI declined to move Qatar and the UAE from its frontier markets index, where they reside today, to the closely followed emerging markets index.