The United Emirates and Qatar failed for the second time this year to get an upgrade to emerging market status at MSCI Inc as Gulf countries struggle to revive equity trading, Bloomberg newspaper said on Thursday. MSCI, whose stock indexes are tracked by investors with about $3 trillion in assets, will maintain the two countries' frontier status and keep them under review for potential reclassification in June, it said, citing an MSCI statement. The index provider cited investors' concern over the effectiveness of the countries' delivery versus payment model, and Qatar's failure to announce plans to relax its foreign ownership laws, Bloomberg said. Trading volumes in Arabian Gulf stock markets have plunged this year as foreign funds trimmed holdings of riskier assets amid regional uprisings and as Europe's debt crisis deepened. Dubai volumes are at a six-year low and Qatar's are about 40 percent lower than in the same period in 2009. “I would have been happy if they said the lack of liquidity in the markets was one of the main reasons for their decision, but they didn't, so I feel that they evaded the issue,” CapM Investment PJSC's Abu Dhabi-based Chief Investment Officer Mohammed Ali Yasin was quoted as saying on Thursday. “I don't think it was unexpected because the market conditions in December aren't better than what they were in June.” MSCI's decision came after a delay in June to allow investors time to assess the DVP models which the exchanges in both countries implemented. Market participants said there are “significant concerns over the effectiveness of this new framework to fully ensure the safeguarding of their assets under certain circumstances,” the index provider said its latest statement.
