Qatar is an emerging market participant in the market classification review by the Morgan Stanley Capital International (MSCI). MSCI is a US-based firm that provides equity and measures stock market worth and presentation in worldwide emerging index markets. However, MSCI covers different classes of assets in the global market. The market classification is regularly reviewed by the MSCI for all listed countries to ensure importance and progression of various markets. Also, the MSCI puts potential markets under evaluation and analysis for possible listing in the market reclassification on an annual basis.
Additionally, the MSCI discusses the performance of any potential market in the Annual Market Classification Review to determine which new countries qualify for reclassification to the next phase. However, the MSCI sets its criteria for reclassification into the emerging market based on Market Classification Framework. Still, the MSCI investigates the potential market and communicates further with the investment community before making any classification conclusions. In this case, Qatar has been reviewed and listed for reclassification from a Frontier market to an Emerging market. However, there are characteristics or criteria required to participate in the market classification.
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"Qatar as a Player in the Emerging Market".
Undoubtedly, the MSCI market classification framework always considers economic development, size and liquidity and market accessibility for classification market participants (Anson, Mark, Frank J and Frank 456). Nevertheless, economic development is a non-issue while reclassifying frontier market and emerging markets due to the big growth levels between the two economic worlds.
Size and liquidity of an emerging market are considered highly for a country to participant in market classification. However, this consideration is based on minimum economic requirement according to the MSCI Global Standard Index.
Secondly, market accessibility is used to expose a given market to the global institutional investors. Also, this characteristic is based on qualitative procedures that are revised annually in the Global Market Accessibility Review by the MSCI. However, a market is considered for upgrade only if classification standing is irrevocable. In fact, MSCI regularly communicates with the investment community to ensure certainty and normal market operation. Still, there might be a few off-cycle communications concerning reclassification when unpredictable changes in the market occur.
Notably, market classification affects dividends payout decision positively since it plays the role of index production and investment presentation in the global market for a country. Indeed, the MSCI uses market reclassification in balancing a market’s economic growth, index strength and accessibility to the global investment community. Since the MSCI aims at strengthening the capital growth of a country in the universal investment community, most investors seeking income prefer equity dividends to fixed income. Additionally, more emerging market companies realize more growth than others in the world since the MSCI aims at strengthening emerging market’s capital index. Still, majority equity investors remain fascinated to dividend paying stocks due to the total returns dividends attract. Further, dividends a way of attracting investors into a company and companies use this approach by establishing a dividend policy.
Ideally, companies concentrate on economic growth, debt repayment before returning money to its shareholders. Since profits grow faster than earnings, majority Emerging markets can increase dividends compared to developed markets (KHANNA, PALEPU and BULLOCK 373). However, since most emerging market countries have invested in future growth, there is enough allowance to increase dividend payouts. By raising dividends, emerging market countries feel they are generating income and development. Finally, emerging markets believe that profits should not be used for investment but rather should be given back to shareholders. In this case, emerging markets would argue that divides would be raised to pay excess equity and to realize elevated valuations and income.
Indeed, participating in the emerging market is a big advantage for Qatar in the global economic investment community. Indeed, Qatar has a potential in the world market index with a high potential growth.
