SOURCE: Global Equity International Inc

June 23, 2014 11:15 ET

The Impact of the Reclassification (Upgrade) From "Frontier Market" Status to "Emerging Market" Status of United Arab Emirates Markets

Estimates Suggest That the Reclassification Is Likely to Bring Anywhere Between $300 Million to $4 Billion Worth of Foreign Inflow to the Markets

DUBAI, UNITED ARAB EMIRATES--(Marketwired - Jun 23, 2014) - Global Equity International, Inc. (OTCQB: GEQU) and its fully owned subsidiary Global Equity Partners Plc., a specialist consultancy firm with offices located in Dubai and London would like to inform and help our shareholders understand the impact of the reclassification (Upgrade) from "Frontier Market" status to "Emerging Market" status of United Arab Emirates Markets.

As of June 1, the financial markets of the UAE will graduate (as accredited by index compiler MSCI -- Morgan Stanley Capital International) from frontier to emerging market status.

This reclassification decision had been three years in the offing before the announcement was made on June 12 last year. The UAE will have 0.58% weight in the Morgan Stanley Capital International Emerging Market Index.

Morgan Stanley Capital International (MSCI) has included the largest nine UAE companies to the All-World index and to the Emerging Markets Index. National Bank of Abu Dhabi PJSC will be one of the biggest additions.

But what does this all mean?


After a scare in the summer of 2013, global developed markets have been on a bull run, as investors became convinced that the start of Fed tapering did not imply a quick move to raise policy interest rates.

Closer to home, anticipating the reclassification, and supported by strong macro fundamentals, the UAE markets have had a good run -- further aided by positive sentiment surrounding the Dubai Expo 2020.

As of May 26, the Abu Dhabi Securities Exchange had risen 17.7 per cent, trading at 5,048.58 points while the Dubai Financial Market had surged 47 per cent in the same period, trading at 4954.62 points. Indeed, Dubai has been one of the top market performers.


The immediate expected benefit of reclassification will result from an anticipated increase in portfolio flows with the entry of foreign institutional investors and passive or index-tracking investors that will have to rebalance their portfolios to include the U.A.E.

Typically, institutional investors are restricted to investing in developed and emerging markets, so the reclassification highlights the entry of a new class of investors into the domestic market.

Estimates suggest that the reclassification is likely to bring anywhere between $300 million to $4 billion worth of foreign inflow to the markets.

The increased exposure to international investment might also lead to an increase in initial public offerings (IPOs), thus potentially leading to a much-needed deepening of the equity market in the region.


Integration of stock exchanges is imperative to developing a liquid market, with a common trading system and a single system for clearance and settlement and security depository.

The first step in this direction would be the unduly delayed consolidation of the three UAE exchanges to form a common market. The strategic objective for the UAE is to have a deep, broad and liquid financial market, building the capacity of managing and controlling their own wealth and being able to allocate capital internationally from their home base thereby gaining international financial power.


The reclassification is likely to raise the bar in terms of corporate governance in the UAE. Foreign institutional investors will not be as complacent or inactive as domestic retail investors.

Corporate governance rules need stronger enforcement and the timeliness and content of management and financial reporting needs a major overhaul.

Reclassification is an opportunity for listed companies to improve their corporate governance and investor relations in accordance with international standards, improve disclosure and transparency and comply with international reporting standards.


Sound, well-functioning financial markets require a broad base of institutional investors to anchor markets. While reclassification will attract foreign investors, they are not a substitute for domestic institutional investors such as pension funds and insurance companies, which typically operate as the backbone of a market.

The UAE will need to develop a legal and regulatory framework to build domestic pension systems as well as liberalize an over-protected insurance sector.

Extracts of this press release have been taken from Gulf Business News

Peter Smith, CEO of Global Equity International Inc., commented: "The reclassification is a tremendous step in the right direction for the Equity Capital Markets of the UAE and the economy in general, it demonstrates to the wider world that the UAE is developing as a nation and starting to progress in general fiscal terms. At GEP we are in the process of establishing a specialist opportunities fund that will take advantage of specific high value offerings centred around the MENA region, we have already experienced interest from the USA in the prospect of investing in such a fund based in the majority on the new status the UAE carries. It is clearly an exciting time to be involved with the development of such a strong market."

About Global Equity Partners Plc. a fully owned subsidiary of Global Equity International Inc. (GEQU).

With offices located in Dubai and London, Global Equity Partners Plc. advises worldwide business leaders with their most critical decisions and opportunities pertaining to growth, capital needs, structure and the development of a global presence. With significant relationships in USA, UK, Central Europe, the Middle East and South East Asia, we assist our clients with finding their true potential by bringing to them external capital and resources that place an emphasis on collaborative thinking. With a physical presence in London and Dubai, we introduce our clients to the unique opportunity of listing their shares on one of many Stock Exchanges around the world.

Safe Harbor

This press release may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to anticipated revenues, expenses, earnings, operating cash flows, the outlook for markets and the demand for products. Forward-looking statements are not guarantees of future performance and are inherently subject to uncertainties and other factors which could cause actual results to differ materially from the forward-looking statements. Such statements are based upon, among other things, assumptions made by, and information currently available to, management, including management's own knowledge and assessment of the Company's industry and competition. The Company refers interested persons to its most recent Annual Report on Form 10-K and its other SEC filings for a description of additional uncertainties and factors, which may affect forward-looking statements. The Company assumes no duty to update its forward-looking statements.

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