13/09/2015 07:43 AST
FTSE Russel, the global leader in indexing, has upgraded Qatari market to Secondary Emerging Market. Following its September 2015 annual review, FTSE announced Qatar will be promoted from Frontier to Secondary Emerging since the market meets the criteria required for the upgrade.
The FTSE announcement is a shot in the arm for Qatar, which is working to further deepen its capital market system. Qatar has already been upgraded by two other global index compilers MSCI and S&P, in May 2014 and September 2014, respectively.
Qatar, along with 10 other markets, including China and Kuwait, were placed in the FTSE watch list to be considered for the September 2015 market classification review for the upgrade at different levels. Of this, just three markets found their places in the upgraded list. While China A-Shares remained on Watch List for possible inclusion as Secondary Emerging, Kuwait failed to be included in the list this time.
The FTSE Emerging Markets Indices are a part of the FTSE Global Equity Series (GEIS). The index helps investors analyse the performance of the most liquid companies in emerging markets. The index includes several large-and- mid-cap stocks from advanced and secondary emerging markets. China had the highest weightage (26.6 percent) in this index, followed by Taiwan (14.1 percent) and India (12.6 percent), according to analysts.
Qatar’s status of upgrade to Emerging Market is likely to enhance liquidity and turnover in the market. In the past, when Qatar was upgraded to the Emerging Market status by MSCI and S&P, the country’s average daily turnover seen increasing. Hence, an upgrade by FTSE is expected to add to the market momentum.
“It is difficult to say how many companies will make it to the index, however, we can make a fair assessment that the maximum number of companies that do make it to the EM index will not be more than what are already included in the FTSE Frontier Index i.e.37”, analysts at Global Research said.
If all of these companies make it to the FTSE EM Index, Qatar’s weight will not be more than 1.6 percent; which essentially defines the upper limit, they noted.
Chris Woods, Chairman of the Governance Board at FTSE Russell, said :”Institutional investors worldwide use our benchmarks throughout the investment process, as they have confidence in FTSE Russell’s governance structures which ensure clients’ needs are properly reflected in the construction and management of our indexes. The Annual FTSE Country Classification Review demonstrates our commitment to promoting transparency and openness in the development and reconstitution of all our benchmarks.”
Qatar will be removed from the Frontier index in September 2016. In recognition of the potential liquidity demands arising from its promotion, Qatar’s inclusion as a Secondary Emerging market status will be effected in two tranches. The first tranche of 50 percent will be implemented in conjunction with the semi-annual review of FTSE GEIS in September 2016 and the second 50 percent tranche will be implemented in conjunction with the March 2017 semi-annual review.
On other country classification changes, FTSE confirmed Greece will be demoted from Developed to Advanced Emerging due to the recent extended market closure, imposition of capital controls on domestic investors and continued economic instability and Latvia and Palestine, previously ‘Unclassified’, will be designated as eligible Frontier markets within the FTSE Country Classification scheme.
The promotion of Latvia and Palestine to Frontier market status will be implemented in conjunction with the rescheduled annual review of the FTSE Frontier Index in September 2016.
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