About US$1 billion will flow into UAE stock markets from foreign index trackers alone as a result of the upgrade to emerging market status by MSCI later this year, experts believe.
Passive index trackers are institutional investors who follow certain fixed global investment trends via stock indexes, but many had been prevented from investing in UAE stocks when they had only “frontier” status. When the upgrade takes place, investors will be able to put money directly into funds that track those indexes.
HSBC, the global bank, estimates the potential amount available from these funds at $1bn. More than half of them are American, the bank says.
The MSCI upgrade will also allow investors to buy directly into UAE markets via individual equities, listed on the Abu Dhabi Securities Exchange (ADX), the Dubai Financial Market, and the Nasdaq Dubai market.
Last week, the leading 10 companies on the ADX held a series of presentations in New York to explain to US investors the benefits of investing in UAE stocks when the MSCI upgrade takes place. People on the trip reported a “positive response from the Americans, who are the biggest investors in the world.
Rashed Al Balooshi, the ADX chief executive, said: ”As one of the leading global performers in 2013, ADX is very attractive to international investors, particularly in light of the upgrade by MSCI of ADX to emerging market status, which takes effect this year, as well as the encouraging performance of the UAE economy. This is our second visit to the US in recent years, and we are confident of a very positive response. The companies participating represent a good cross-section of the ADX. We are now seeing increasing interest in the region from investors in the US, and this roadshow is intended to boost this trend, ” he added
The ADX contingent was the first of several such global presentations, aimed at persuading international investors to buy shares in top UAE companies. A similar ADX roadshow is expected to visit London later this year, while Dubai markets are in regular contact with international investing institutions.
Greg Fewer, the finance director of the Abu Dhabi real estate leader Aldar, which was present on the New York trip, said: “There are already a number of US funds invested in Abu Dhabi but this number will increase significantly after May as the fund management universe multiplies considerably when you move from frontier to emerging market status.”
Many of the UAE’s top companies, including Aldar, are expected to be included on MSCI’s list of “investible” equities when the upgrade takes effect.
Some of the biggest, including the communications group Etisalat, are believed to be considering changing their company rules to allow foreign investors on their share register.
Foreign investors will be attracted to UAE markets by the sound economic outlook in the region, and the solid financial backing most corporates have in Dubai and Abu Dhabi.
The run-up to Expo 2020 will also be a period of solid economic growth, which will be reflected in the region’s equity markets, experts say.
fkane@thenational.ae
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