STOCKED AND READY

In 2014, bourses in the UAE and Qatar were upgraded to emerging markets status. Could the opening of Saudi Arabia’s Tadawul see it follow?

STOCK MARKETS IN THE GCC HAVE had a rough few weeks, following the recent drop in oil prices. Dubai’s index tumbled 9.2 per cent in December, while Saudi Arabia’s Tadawul also saw its year-to-date gains almost wiped out last month.

However, despite the drastic impact that the oil slump had on the region’s bourses, Dubai’s index is still up 15.4 per cent year-to-date, while Qatar is up 19 per cent.

Excluding December, the year 2014 was a landmark one for the region’s bourses – UAE and Qatar were both upgraded from frontier markets to emerging markets by index compilers MSCI and S&P Dow Jones Indices.

“It is a statement about the way those markets have started to develop,” said Alexander Matturi, CEO of S&P Indices, in an exclusive interview with Gulf Business. The markets may not have made it across the screening for many fund managers if they were still considered frontier markets.

“They are now at that international standpoint, on par with a lot of markets. It’s a positive trend coming from this region that will open it up to a lot of attention,” he explained.

However, he quickly added that the move would not change the day-to-day fundamentals of these bourses, since liquidity still needs to be built up.

Additional liquidity will come slowly and steadily, and will probably build up particularly due to a recent announcement from Saudi Arabia.

THE TADAWUL TALE

The kingdom made a groundbreaking announcement last year, revealing plans to open up its mammoth $530 billion stock market to direct foreign investment.

At present, the Tadawul, the most liquid bourse in the region in terms of daily trading volumes, restricts direct investment to Saudi and other GCC investors. Investors from outside the region can participate indirectly, through back-to-back swap arrangements and mutual funds.