The largest publicly traded company in the United Arab Emirates, Etisalat, will soon allow foreigners to own its shares, Al Khaleej newspaper reported today citing the telecom operator’s chief executive.
It marks an important step for the UAE stock markets (made up of three different bourses; two in Dubai and one in Abu Dhabi) to address an important prerequisite for gaining international investment attention and boosting liquidity on seriously low volumes.
Foreign ownership is a vital component for gaining “emerging markets” status from the MSCI, an index provider. The UAE is now classed as “frontier market” status, a grade that Bangladesh and Serbia and other volatile and under-developed markets share. It has been turned down for an upgrade over and over again in the past few years because of its low foreign ownership levels and accessibility issues relating to clearing and settlement of stocks. Qatar is in the same position, but worse. Saudi Arabia, however, is on the right track and is inching toward opening up its market to direct foreign investment. As the most liquid Arab market and one of the richest, it would do well to go this way.
Any classification promotion for the UAE equity markets would provide a boost to stocks by attracting larger pools of investors who track MSCI’s equity indexes.
If Etisalat actually goes through with this, it could become the catalyst for other companies to do the same.