Local markets rose even after UBS downgraded the UAE, citing lacklustre growth and declines in return on equity for shares of publicly listed companies.
The country was removed from UBS's "preferred country basket," citing a lower growth compared with other frontier markets.
"The UAE market no longer makes returns above its cost of capital," the Swiss bank said in a note to clients. "Uncertainty around the MSCI decision on June 21 to reclassify UAE as an emerging market adds to the risk short term."
Oman, Qatar and Lebanon will remain in the "preferred country basket," it added.
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