Royal Family Stake in FAB Proves Obstacle to MSCI Reweighting

(Bloomberg) -- A stake controlled by the royal family of Abu Dhabi is getting in the way of the United Arab Emirates’ largest bank earning a bigger weighting in MSCI Inc.’s benchmarks.

Shares in First Abu Dhabi Bank PJSC, which unexpectedly failed to win an upgrade of its weighting in a May 13 review by MSCI, are heading for their worst week since the lender was created in a 2017 merger. MSCI considers strategic holdings, along with limits on foreign ownership, among factors when assessing a stock’s representation, said Chairman and Chief Executive Officer Henry Fernandez.

“Only the shares that are fully available for a purchase are the ones that will get included in an index,” he said Wednesday in a Bloomberg TV interview. MSCI’s decision caught investors by surprise, as they had expected an upgrade after the U.A.E. bank known as FAB raised the limit on foreign ownership earlier this year.

Royal Family Stake in FAB Proves Obstacle to MSCI Reweighting

One factor “that a lot of investors don’t pay a lot of attention to is the strategic holding of a company, that therefore is not out for sale,” Fernandez said. In FAB’s case, “the constraint is that there is a series of shares that are owned by the royal family.” The stock dropped 0.6% Wednesday after yesterday’s 8.6% slump, and is down 10% this week.

The Abu Dhabi Investment Council (ADIC), an investment arm of the government of Abu Dhabi, is the lender’s biggest shareholder, owning about a third of the shares as of the end of last month.

Royal Family Stake in FAB Proves Obstacle to MSCI Reweighting

More:

  • On May 14: Arqaam Capital Sees ‘Risk’ in FAB’s FTSE Allocation in June
  • On May 14: MSCI’s Decision on FAB Seen as The Biggest Surprise: EFG-Hermes

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