UAE Is Too Rich To Be An Emerging Market, Says US Bank

2026-02-24 02:19:19

(MENAFN- Khaleej Times) JPMorgan Chase & Co. on Tuesday said it would remove the UAE from its emerging-market bond indexes as the country surpassed the US bank's measures of wealth for three consecutive years.

The UAE will be phased out of JPMorgan Chase's emerging market bond indices in equal weight decrements over a four-month period, starting March 1 and culminating on June 30.

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Bloomberg reported that the UAE, which accounted for 4.1 per cent of JPMorgan's global diversified EM bond universe, will make its exit in four equal decrements.

JPMorgan said in a statement that the country will also fully leave the euro-denominated bond grouping, where it has a 1 per cent weight on March 31.

Vijay Valecha, CIO, Century Financial, said JPMorgan that this technical adjustment reflects improved economic fundamentals, strong sovereign balance sheets, and higher income levels that make the UAE less representative of traditional emerging markets.

“For three consecutive years, the UAE exceeded JPMorgan's criteria of GNI per capita and purchasing power parity. The consequence is significant as UAE sovereign bonds will no longer be benchmarked against Brazil, Turkey, or South Africa,” he added.

He explained that the UAE already shows many attributes of a developed economy.“The GNI per capita is similar to Southern European peers. Moreover, foreign exchange reserves remain robust, and the sovereign credit is a solid AA, in line with investment-grade peers. Meanwhile, the Abu Dhabi and Dubai financial markets have matured considerably. The robust markets attract institutional capital that was once directed towards traditional developed markets.”

What does it mean for investors?

Valecha sees the UAE could also be included in developed market indices run by MSCI or FTSE over time.“This could open the door to a substantially larger pool of DM capital, boosting the economic strength of the country further.

Madhur Kakkar, founder and CEO of Elevate Financial Services, said this is a strong validation of the UAE's economic maturity.

“Exiting emerging-market bond indices reflects sustained income growth, fiscal strength, and macro stability. It signals the UAE's evolution into a global capital magnet, attracting higher-quality and long-term institutional flows. In fixed income, this move effectively shifts the UAE out of the EM universe and possibly classification of UAE sovereign and related debt into developed markets, if not at par, definitely close to US, UK and other mature markets," said Kakkar.

However, equity market classifications are separate, he said.

“Providers such as MSCI apply stricter criteria on market depth, liquidity, and accessibility, so the UAE may remain EM in equities in the near term. We have seen increasing volumes and market participation in UAE equity markets as well.”

Investment flows

Commenting on the impact of investment flows after the JPMorgan Chase revision, Kakkar said the UAE FDI momentum has already been accelerating over the past couple of years, with flows in 2024 up by 49 per cent to $45.6 billion and greenfield inflows surging 78 per cent to $33.2 billion in 2025.

“It reinforces the UAE's positioning as a world-class financial and investment hub. The move strengthens global credibility, boosts investor confidence, and aligns with its long-term ambition to be among the leading global destinations for capital and talent,” he added.

In the short term, Valecha said exclusion from the EM bond index may reduce passive inflows tied to that specific benchmark, but over time, it signals market maturation that can attract a broader spectrum of global investors.

“The UAE's strong growth, especially in non-oil areas like tourism, trade, and financial services, along with solid public finances and stable external accounts, has made it more like an advanced economy. These changes can help bring in more types of investors, attract better quality capital, and strengthen the UAE's reputation as a top global investment spot,” he said.

In summary, JPMorgan's reclassification boosts the UAE's reputation in global finance and marks its shift from an emerging market to a more advanced economy, Valecha concluded.