The United Arab Emirates and Egypt shares are poised to attract overseas investors after Vanguard Group, the largest Untied States mutual-fund provider, switched to FTSE Group from MSCI, EFG-Hermes said. The move opens up Vanguard's $67 billion emerging-markets fund to the UAE since the Arab nation is ranked higher at FTSE than it is at MSCI, Julian Bruce, EFG-Hermes' Dubai-based director of institutional sales trading, said by e-mail yesterday. The second-largest Arab economy has emerging-market status at FTSE and frontier status at MSCI. UAE stock exchanges comprise 0.34 per cent of FTSE's EM index, while the weighting of Egypt's benchmark gauge, the world's best performer this year, is 0.51 per cent, compared to 0.36 per cent in MSCI. Benchmarks in Dubai, Abu Dhabi and Egypt rose yesterday, with the DFM General Index soaring to the highest level in more than five months and Egypt's EGX 30 Index climbing 0.8 per cent, snapping a four-day drop, in Cairo. "The news that one of the largest EM exchange-traded funds is switching to the FTSE index series is a positive factor for both the UAE and Egypt,- Bruce said. "Whilst overall weightings of those countries within the global series are very small, they are meaningful when compared to average daily value traded, especially in the UAE Timing remains uncertain but this type of event is always a catalyst for increased speculative activity. Lower volumes The move by Vanguard, which will use FTSE as a benchmark for about $537 billion of assets, comes after Dubai trading volumes dropped as Europe's debt crisis trimmed the appetite for riskier assets. About 228 million shares traded in Dubai yesterday, down from March's 835 million peak. The UAE equities are valued at $108 billion and those in Egypt at $69 billion, according to data. The UAE failed for a fourth year to secure an upgrade at MSCI to emerging-market status in June, as the index provider cited issues with market accessibility. Dubai's index rose 1.2 per cent to 1,623.24 at the close in the emirate, the highest since May 1. The measure has rallied 20 per cent this year, making it the best-performing stock market in the six-nation Gulf Cooperation Council, which includes Saudi Arabia. Outperformance Abu Dhabi's ADX General Index, which is up 10 per cent in 2012, added 0.2 per cent while Egypt's EGX 30 Index headed for the biggest gain since September 25, advancing to 5,656.3. Egyptian shares have soared 56 per cent this year, outperforming 90 global indexes. Vanguard will adopt benchmarks from FTSE for six international stock index funds, and gauges developed by the University of Chicago's Center for Research in Security Prices for 16 US equity and balanced funds, the Pennsylvania-based firm said on Tuesday. The change will affect both index mutual funds and exchange-traded funds at Vanguard, whose ETFs are structured as share classes of its mutual funds. The switch to the FTSE benchmarks, which includes about $170 billion in fund assets, is the largest in international index providers, FTSE said. MSCI shares slumped 27 per cent in New York, the most on record, to $26.21.
