UAE gets an Upgrade

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The future of U.A.E. in terms of world ranking seems to be getting brighter.

Russell Investments, the global leader in fund management has classified the UAE? market under the emerging market status, while MSCI and S&P are delaying the market?s upgrade from the frontier-market status, as per their indices. The country was twice rejected for the upgrade.

On reconstituting its global indices, Russell Investments drew out a paper to examine the U.A.E. market? in comparison to other countries represented in the Russell Emerging Markets (REM) Index and median indicators from the Russell Frontier Index (RFI).

Research Method

Russell Indexes applies two key macro-level measures – the EIU country risk score and World Bank Income Category; and market accessibility and operational risk across factors, including additional market size and?invest-ability?measures – GDP, GDP per capita, market capitalization, market capitalization/GDP, and market value (float adjusted)/market capitalization.

Through its classification methodology, Russell seeks to recognize any possible risks of investing in a country by evaluating both macro-level and market-level factors.


A basic scorecard devised by Russell is used to organize and score each of the countries in the REM.? Based on each countries rank for each factor, it is given a ?score?, the highest being 21 and the lowest, 0. There are 22 countries in the REM and the U.A.E. ranked 13 based on the total score.

The U.A.E. is the only country to be included in the REM indices within the GCC economy, also most of the criteria based on the rules of Russell for this classification.


The other country in the GCC which is on the border line is Qatar.

Qatar?s regulation that stipulates a 25 percent foreign ownership on Qatari companies tightens the boundaries involved in investment opportunities and the likelihood of allocations to Qatari stocks within emerging marketing portfolios, and thus preventing Qatar from moving out of the ?Frontier economy? classification.

The strongest countries to graduate to developed nation status in the near term were Taiwan and Korea. They held equal scores of 127, while Egypt, Hungary and Morocco has the lowest scores among the REM countries as each country struggle with market size, liquidity and risk.

The progress

The U.A.E?s advancement has been carefully reviewed by Russell. As per Pascal Duvel, President of Russell Investments, Europe, Middle East and Africa (EMEA), ? Its relative size and liquidity profiles are significant compared to the Russell Frontier Index. As well as operational infrastructure which is very satisfactory, UAE classification in our Emerging Market Index is not hindered by foreign limitation ownership.?

The U.A.E?s upgrade would have a greatly positive impact on Dubai that is still recovering from the recession as major investors had to reconsider their financial and investment strategies in the region.

Sources: Kipp Report, The Economic Times, CPI Financial, FOREX

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