The United Arab Emirates' main markets fell more than 1 percent and Qatar ended lower on Thursday after the bourses failed for the third time to gain emerging market status from influential index compiler MSCI. MSCI, which had already denied a promotion to the UAE and Qatar in 2009 and 2010, cited investor concerns on the effectiveness of a new delivery-versus-payment system, or DvP, at some of the bourses. Stringent foreign ownership limits in Qatari stocks was also an impediment, it said.
Dubai's benchmark fell 1.3 percent and Abu Dhabi lost 1.2 percent to its lowest finish since March 2009. Emaar Properties dropped 4.3 percent, Dubai Financial Market shed 4 percent, and Drake & Scull dipped 2 percent.
"We hold the view that the new DvP model ... has been well tested, and the real reason behind the international investors' concerns and the MSCI decision is the lack of volume," CAPM Investment said in a note. The UAE's three bourses - Dubai Financial Market, Abu Dhabi Securities Exchange and Nasdaq Dubai - have been plagued by slumping trade and prices.
Abu Dhabi's Sorouh Real Estate fell 3.3 percent, Dana Gas slid 1.9 percent and First Gulf Bank dropped 3.7 percent. Aldar Properties shed 4.2 percent. The developer will convert a portion of bonds held by Mubadala Development Co into shares as part of a deal which will eventually see the investment fund take its stake to nearly 60 percent.
UAE markets are expected to trade sideways next week, with investors turning their attention towards fourth-quarter results season, which starts in January. "End of year results are (near)... expectations are already very low in the UAE so (there is) not much room for disappointment," said Fadi Al Said at ING Investment Management. "I wouldn't be betting on a big downward movement." In Qatar, the index lost 0.2 percent, down in four of the last five sessions after last week's eight-month high.
MSCI said earlier that Qatar's 25 percent foreign ownership limit would stop it being upgraded. The bourse has asked firms to raise limits but limits have remained. Qatar National Bank fell 0.9 percent and Industries Qatar shed 0.4 percent but gainers outnumbered losers 13 to nine.
In Oman, the benchmark eased 0.1 percent from the previous day's 12-week high. Oman Telecommunications shed 1.6 percent, Renaissance Services dipped 1.1 percent and Galfar Engineering fell 1.4 percent. The sultanate's index had risen in nine of the previous 11 sessions as investors bet on blue chips posting strong results and on hopes for a new-year rally, analysts said.
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