The United Arab Emirates and Qatar may well become the first two Gulf countries to permit short-selling as regulators try to revive trading volumes and secure MSCI Inc.’s Emerging Markets status.
The implementation of short-selling is ‘in line with the efforts to upgrade the United Arab Emirates markets,’ the country’s regulator stated in an e-mailed statement to questions. Qatar’s stock market exchange has also pointed out that it will introduce short-selling and derivatives trading, in addition to raising the percentage of stock foreigners can own in an enterprise to 49% from its current 25%. ‘As these markets join the MSCI EM, more attention will be focused on them, trade volumes will probably rise and the market will likely become more efficient’, commented Philippe Langham, who administers the $ 660 million Royal Bank of Canada Emerging Markets Fund in London.
Short sellers borrow and sell an underlying asset, in the expectation of buying it back later for less to make a profit. MSCI classifies six of the Gulf’s seven bourses, including those in the United Arab Emirates and Qatar, as frontier markets, a designation that normally applies to economies and financial markets that are less developed than emerging markets.