Status upgrade too late for emerging markets party



Just about any transaction undertaken on an electronic financial market can be completed in half a second or so.
With that in mind, six years is a phenomenally long time to wait when you are trading stocks.
Six years is how long MSCI has been mulling whether to allow the UAE, and others around the region such as Qatar, to upgrade to the hallowed emerging markets status.
In the wee small hours of yesterday morning the decision was finally made, much to the delight no doubt of the UAE investment community and the stock market operators in Dubai and Abu Dhabi.
The upgrade is indeed a cause for celebration and a great achievement for the country. Every year the exchanges here have worked hard to implement new technologies and procedures to ensure that market operation is up to speed with the best in the world and that investors receive the same services and protections that they would expect in any other sophisticated financial centre.
The rewards are also expected to be handsome. The MSCI Emerging Markets Index includes more than US$7 trillion worth of equities at current prices.
Just being included in the gang means more of the world's available investment funds will flow through UAE markets thanks to things such as tracker funds that are linked to MSCIs various products.
Analysts expect perhaps about $300 million to $400m of new funds would flow through this country as a result of the upgrade, which is scheduled to come into force next year.
But those rewards could have been far greater if the MSCI decision had been made just a little bit sooner.
Most investors around the world are going very cold on emerging markets just now. In fact the prevailing view among the majority of mainstream analysts is that the prolonged emerging markets rally that has been in full effect pretty much since early 2009 is finally over.
This year so far the MSCI Emerging Markets Index has charted a persistently downwards trajectory - in complete contrast to both the Abu Dhabi and Dubai markets, which have performed better than most indexes on Earth.
The MSCI Index closed at 39.38 after the UAE upgrade decision was made, down almost 2 per cent on the day and about five points lower than its level at the start of the year.
That is only a point or so away from the level it was trading at in the beginning of 2007, the year the UAE began its campaign to join.
Last year by contrast, the index enjoyed a stellar performance, rising in value by some 18 per cent.
But these fluctuations in equity prices are just one indication that the emerging markets rally is grinding to a halt.
The bond markets provide much more convincing, and worrying, evidence that emerging markets are staring down the barrel of a troubling new cycle.
The prevailing trend in global markets today, as it has been for the past month or more, is the steep rise in US treasury yields and the increasing strength of the dollar.
This has caused investors to pull back from emerging markets debt as currencies from those countries - such as Brazil, Mexico and Turkey, for example - depreciate against the dollar and their bonds are less attractive than American treasuries.
In short, while the financial crisis was in full swing and US treasuries became less of a safe haven than they are supposed to be, investors jumped aboard the emerging markets bond train to take advantage of high yields.
Now the US Federal Reserve has hinted that it might start reining in its fiscal stimulus policy, which means it thinks the crisis might be drawing to a close, and investors are returning to the familiarity of US treasuries.
A change of tack in China - which it is hard to believe is actually defined as an emerging market given its power, its scale and our dependence upon it - is also a major factor in this big investment strategy shift.
China is largely viewed as moving into a new stage of development away from rapid urbanisation and infrastructure development towards a more mature consumer economy.
For this the country will need fewer resources like oil and steel and so will not be the great driver of the global resource economy that it has been.
In lock step with China's changing gears, the other emerging markets are expected to enjoy slower GDP growth as this cycle shifts, which can be expected to translate into less impressive share price growth.
The MSCI upgrade is indeed a historic milestone for UAE markets, but it remains to be seen how much longer we will have to wait before we enjoy the real fruits of all the hard work we put in to achieve it.
 
jdoran@thenational.ae

What is the FNC?

The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning. 
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval. 
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
 

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Company name: Marefa Digital

Based: Dubai Multi Commodities Centre

Number of employees: seven

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Co-founders: Elie Habib, Eddy Maroun
Based: Beirut and Dubai
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Investors: MEVP, du, Mobily, MBC, Samena Capital

The rules on fostering in the UAE

A foster couple or family must:

  • be Muslim, Emirati and be residing in the UAE
  • not be younger than 25 years old
  • not have been convicted of offences or crimes involving moral turpitude
  • be free of infectious diseases or psychological and mental disorders
  • have the ability to support its members and the foster child financially
  • undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
  • A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
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In numbers: PKK’s money network in Europe

Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010

Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille

Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm

Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year

Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”

Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners

TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013 

How to wear a kandura

Dos

  • Wear the right fabric for the right season and occasion 
  • Always ask for the dress code if you don’t know
  • Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work 
  • Wear 100 per cent cotton under the kandura as most fabrics are polyester

Don’ts 

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How tumultuous protests grew
  • A fuel tax protest by French drivers appealed to wider anti-government sentiment
  • Unlike previous French demonstrations there was no trade union or organised movement involved 
  • Demonstrators responded to online petitions and flooded squares to block traffic
  • At its height there were almost 300,000 on the streets in support
  • Named after the high visibility jackets that drivers must keep in cars 
  • Clashes soon turned violent as thousands fought with police at cordons
  • An estimated two dozen people lost eyes and many others were admitted to hospital 
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Name: Airev
Started: September 2023
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Sector: Generative AI
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
 
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COMPANY PROFILE
Name: Kumulus Water
 
Started: 2021
 
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