MSCI guest list grows as UAE shares soar

MSCI will announce on May 14 which stocks from the UAE and Qatar are to join its Emerging Markets Index – but Deutsche Bank is jumping the gun and making predictions.

The UAE’s bourses have been booming over the past year, and this has pushed up the number of stocks that will satisfy criteria for inclusion on the index.

In July, Deutsche Bank identified 8 stocks that would satisfy the MSCI inclusion criteria.

The bank on Thursday updated this to 12 stocks from the UAE in a paper in which it applied its equity research criteria to the countries’ listed companies.

Deutsche Bank previously predicted that Emaar, National Bank of Abu Dhabi, First Gulf Bank, DP World, Abu Dhabi Commercial Bank, Dubai Financial Market, Aldar and Arabtec would meet criteria for inclusion on the index.

Growing foreign ownership limits and the increased volumes traded of other stocks in the UAE have also added Dubai Islamic Bank, Union National Bank, the Investment Corporation of Dubai and Union Properties to the list.

Companies must meet a variety of MSCI’s criteria to warrant inclusion in the index.

First, there is a minimum market capitalisation cut-off point. This amount is adjusted every six months, and in November it stood at US$162 million. Of this, $81m must be freely floated. Shares must also be traded on 80 per cent of possible trading days.

Also, 15 per cent of the value of the company should be traded annually, and calculations are done to ensure that over a period of 12 months the threshold is met. Over a period of 3 months, trading should occur at a rate that if annualised would be equivalent to the required level.

MSCI evaluates the ease with which foreign investors can buy shares. The foreign inclusion factor is measured as the proportion of outstanding shares that are freely-floated and available for foreigners to purchase, and foreign room measures the percentage of shares available for foreigners that are still available to purchase. Foreign inclusion and foreign room must both be greater than 15 per cent.

Qatar National Bank, Industries Qatar, Ooredoo, Masaf Al Rayan, Commercial Bank, Qatar Electricity, Qatar Islamic Bank, Doha Bank and Vodafone Qatar were listed as companies likely to be included in the index, according to Deutsche Bank last July.

Gulf International, Barwa, Qatar Gas, Qatar Navigation, Al Khaliji Bank and United Development are now also likely to make the cut, it said.

As fund inflows to the UAE and Qatar have grown, the weighting of the new stocks in the index should also increase compared to the previous forecast. The two countries’ updated list of stocks should account for 1.3 per cent compared to 0.95 per cent for the previous selection, according to Deutsche Bank.

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