Gulf companies should allow greater ownership by foreigners if they want to attract long-term institutional investors, according to the former chief executive of Shuaa Capital. "I hope the GCC will be added to the MSCI emerging market index because that would bring in long-term funds and money from all those who have allocations to emerging markets, including endowments, universities and others," said Iyad Duwaji, who stepped down as the chief executive of Shuaa last month after 17 years in the post. "Government support is essential in addressing some of the issues." MSCI Barra, a compiler of stock indexes, classifies Gulf countries as frontier markets rather than emerging markets.
This affects demand for stocks from the region, because many institutional investors or asset managers who track MSCI indexes are restricted from investing in frontier markets. MSCI said in a statement that it "encourages the Emirati regulator to find ways to further facilitate equal foreign access to the local equity market". The UAE and Qatar are on a watchlist at MSCI and could eventually receive emerging market status once remaining issues over ownership, settlement and custody are resolved. Mr Duwaji said ownership restrictions made it hard to convince large institutional players to invest in certain GCC markets or sectors. "Investors want to chose from all sectors when constructing a portfolio. If they can't, it makes it difficult to convince them to look at the whole market."Shuaa, and with it Mr Duwaji, was instrumental in attracting international investors to the GCC.
In the early part of the decade, Shuaa was the first to collect data on the region's 700 listed companies, to start research for clients, introduce indexes and list local companies before the arrival of international investment banks. But Shuaa has had a tumultuous year. It made a loss in three consecutive quarters, largely because of trading losses; was fined almost US$1 million (Dh3.67m) for share price manipulation late last year; and was involved in a long-standing dispute with the Government-owned Dubai Banking Group (DBG).
The public battle over a Dh1.5 billion convertible bond ultimately gave DBG a 48.4 per cent stake and de facto management control. The dispute sent Shuaa's shares lower and triggered a cut in its credit ratings as investors feared a drawn-out court battle. uharnischfeger@thenational.ae
