Dubai shares dropped the most in six weeks yesterday after the UAE and Qatar missed out on an upgrade to emerging market status in Morgan Stanley Capital International\'s (MSCI) latest classification review. Abu Dhabi\'s bourse hit a 33-month low. The Dubai Financial Market (DFM) General Index lost 1.27 per cent to 1,367.49 per cent at the close while the Abu Dhabi Securities Exchange was down 0.75 per cent to 2,424.42. It is the second time this year the UAE and Qatar have missed out on an upgrade to emerging markets status after MSCI postponed its decision in June. Both countries will remain frontier markets for now but they are still under review for a potential upgrade next summer, the index compiler said in a statement posted on its website. Article continues below \"The decision is a reflection of the ground reality: Qatar\'s ownership limits are too low and the UAE needs to have a dual account structure,\" said Akbar Naqvi, executive director at Al Masah Capital. \"It is a very simple scenario MSCI has laid out for the two markets, not once but twice now.\" Naqvi says recent efforts introduced by the UAE authorities to improve market performance were commendable. But he added they still do not tick all the boxes required. ‘Same wishful thinking\' \"If and when MSCI\'s requirements are met, you can expect the upgrade. Until then, at every decision review we will go through the same wishful thinking,\" he said. \"Let us not forget that international investors are also looking at the current daily liquidity and that in itself does not paint a pretty picture: why would they commit to markets that show persistent lack of local trading activity? With the euro crisis still boiling, this may cause local markets to finish the year with a whimper,\" he added. MSCI did not express any particular concern over foreign ownership limits in the UAE, which recently introduced a companies\' law that allows the UAE Cabinet to issue a resolution permitting firms in certain sectors to increase the amount of capital available to overseas investors. However, the index compiler did acknowledge the matter as a concern in Qatar, which only permits foreign ownership limits of 25 per cent. \"With respect to Qatar, stringent foreign ownership limits, including on large companies, remain a major concern to international institutional investors, as the availability of shares to them is not only limited but also potentially very volatile,\" MSCI said in a statement. Meaningful increase \"No change was implemented or announced on this matter by the Qatari regulators during the review period. Any change to the status of the MSCI Qatar index is conditional upon a meaningful increase of foreign ownership limit levels applied to Qatari companies resulting in increased foreign room,\" the statement added. \"An upgrade would have acted as a strong catalyst in terms of decorrelating from international markets. Unfortunately, that did not happen the UAE and Qatar will continue to highly correlate with regional and European markets,\" said Marwan Shurrab, vice-president and chief trader at Gulfmena Investments. \"The MSCI decision will be viewed as disappointing news, especially among retail investors who were building positions ahead of an expected rally. We have seen a short-lived rebound over the last two weeks, particularly in major blue chip stocks. However, they are the same blue chips that will now see some selling pressure on low turnover.\" Earlier this year, MSCI postponed its verdict for six months to allow investors to get used to a new settlement system known as delivery versus payment (DvP). MSCI said the feedback received from foreign institutional investors over the UAE\'s DvP system was positive in terms of its introduction and the model\'s \"seamless functioning\". However, MSCI added that \"investors continue to stress significant concerns over the effectiveness of the new framework to fully ensure the safeguarding of their assets under certain circumstances, particularly for failed trades where a forced sale of assets, without the owner\'s consent, remains a possibility\". DvP is a securities industry procedure in which payment for a security must be made when it is delivered. Under the previous dual-account system, the payment is made to a bank first, which then pays for the security. MSCI cited the old system as a reason for keeping the UAE and Qatar as frontier markets a year ago. Differentiation crucial \"It is important to differentiate between the two results,\" said Georges Elhedery, HSBC\'s regional head of global markets. \"One of the main sticking points for Qatar in the previous review was largely foreign ownership levels, and this has not materially changed since the last review — Qatar hasn\'t raised the percentage of stocks that can be owned by foreign institutions. \"However, for the UAE the story is quite different. The last review in June wanted to give investors more time to assess how the newly implemented DvP model settles down,\" he added.