The MSCI is an index provider used by thousands of pension funds and investment managers around the world. Inclusion or exclusion from a certain universe, such as the MSCI Emerging Market universe, will mean investors will allocate more or less money into a country because of its perceived risk status.
An upgrade from frontier to emerging market status for Qatar and the UAE, as happened in June, is likely to lead to increased investment flows as these will now be seen as less risky investments.
According to research conducted last month by Insight Discovery, in association with Zawya, half of a sample group of investment professionals based in the Middle East and North Africa region believe additional investment of upwards of $500m will be invested in the UAE and Qatar because of the upgrade. Half of those said new investment will exceed $1bn annually.
While it is a given that asset managers with activities in these countries stand to benefit, the research found most believe it will be the international asset managers with a presence there (with 58% of votes), rather than local asset managers (33%), who will benefit most.
“This survey produced some positive results, particularly for international asset management companies running local funds,” said Nigel Sillitoe, Insight Discovery chief executive.
“After lots of rumours and false starts the MSCI announcement provides a much needed shot in the arm for the asset management industry.”
However, the research did throw up a word of warning for the region. Nearly half (48%) of respondents answered ‘yes’ when asked whether they foresee an asset price bubble in any GCC market arising from the MSCI upgrade over the next three to five years.
