Qatar's bid for emerging market status looks like being delayed

Qatar's chances of an upgrade to emerging market status by index compiler MSCI look slim after the chairman of the country's exchange said foreign ownership limits would remain at 25 per cent.

It is not just the controversy surrounding Qatar's Fifa World Cup winning bid that is weighing on the Gulf nation's market.

Qatar looks like it has knocked on the head any chance of an upgrading by the index compiler MSCI to "emerging market" status.

The chairman of the country's exchange said ownership limits, a key element in the nation's potential for an upgrading from "frontier market" status, would continue to stand at 25 per cent. There had been talk of lifting the limit to 49 per cent, potentially prompting an influx of foreign direct investment.

"We will see, maybe in a year from now we will change it, but for now it will remain the same," Hussain al Abdulla, the Qatari exchange's chairman, told Reuters this week.

"We will change it gradually in the coming months, but not now," he said.

The comments left market players in doubt over whether Qatar would receive the upgrading.

Saleem Khokhar, a senior fund manager at the National Bank of Abu Dhabi, said Qatar had "really dampened their chances in terms of getting upgraded this time round".

He said the exchange chairman's comments, worded "very vaguely", suggested Qatar would wait until next year for an upgrading.

MSCI will announce on June 21 whether it will upgrade the UAE and Qatar from "frontier market" to "emerging market" status.

Foreign ownership restrictions have been a central concern for MSCI. The UAE, also vying for an upgrading, limits foreign holdings in companies to about 49 per cent, but many strategic firms including the telecommunications giant Etisalat and Emirates NBD allow little or no foreign holdings.

Qatar has already made an effort in its bid for an upgrading and was for a while seen as being ahead of the UAE in ticking the right boxes.

It implemented the delivery versus payment system, in which payment for a security must be made at the same time as delivery, back in April, while the UAE's brokers and custodians are still struggling to implement the process.