Upgrade of the UAE’s Financial Markets

  • 16 June 2013

The decision taken by Morgan Stanley Capital International (MSCI) recently to upgrade the UAE financial markets to the ‘emerging markets’, in its annual category review for the classification of global markets, has propelled the nation’s financial markets into a new phase of development. The decision coincides with the UAE’s profound objective of transforming itself into a regional and international financial hub.

The MSCI decision highlights a number of positive signs for the country. To begin with, it reflects international confidence in the mature UAE local markets. Such an elevation is preconditioned by a number of significant criteria, notably openness to foreign investment, free flow of capital to and from the UAE, a stable institutionalized framework, effective legal framework, proper governance, market volume and handling of cash flow in addition to the general condition of national economy.

Elevation to the ‘emerging markets’ category has made the UAE financial markets the center of global attention considering the significance of this index to international financial circles –individual investors, financial establishments, analysts and researchers – as the index gives a clear picture of share markets around the world. MSCI covers 2,700 shares put into circulation by 21 countries including China, South Korea, Taiwan and Brazil. These markets command weight within international financial markets which are prospering and are expected to play a more vital role in the future.

The decision is the expression of trust of a major financial organization in the efficient performance of companies listed by the UAE’s financial markets. It shows that these companies have reached a certain level of financial stability, creditworthiness, maturity and efficiency, are committed to proper corporate governance, and are thus capable of winning the confidence of international rating agencies. This is in line with the UAE’s financial and monetary policies and economic framework that help perform in an efficient and flexible manner in harmony with the government’s development master plan and developments in international money markets.

The MSCI decision also heralds a new stage for the UAE’s financial markets which are very likely to receive large foreign capital flows that may go well beyond $3 billion. This will influence the foreign and local investment flows, which will have a positive impact in the long run. As a result, the UAE markets could become a destination for foreign capital looking for safe and promising business opportunities. This will have a positive impact on the new investment projects in the country and the nation’s economy as a whole.