The United Arab Emirates, Qatar and Jordan are under review for a potential upgrade to an emerging market status by Standard & Poors, an executive said, a coveted status seen boosting foreign fund inflows to the region.

The countries are currently classified as 'frontier' by most index compilers due to restrictions on foreign ownership limits, low liquidity and prospects of further developing trading and settlement systems in the bourses.

Last month, influential index complier MSCI extended a review on whether to upgrade Qatar and the UAE to emerging market status to December, saying it would allow market participants more time to give their feedback on new systems introduced by the Gulf states.

'The consultations are currently ongoing and we aim to reach a decision by the first-quarter of 2012,' Charbel Azzi, S&P Indices Head of Client Coverage for Middle East and Africa told Reuters.

'Obviously, we know that UAE and Qatar have been contenders for the emerging market status.'     

S&P is currently in talks with institutional investors and other market participants and will conclude its consultation process by August 26, the executive said. It will then pass on the feedback to its index committee who will then make a decision whether to upgrade or not, the executive said.

An upgrade to emerging market will force fund managers who benchmark to the emerging market index to allocate funds to the region, thereby increasing liquidity and putting the region in the radar of global investors.

Many asset managers in the Middle East North Africa (Mena) region switched to Standard & Poor's indices last year in the wake of MSCI's move to drop Saudi Arabian stocks from its compilation after a dispute with the bourse.

The UAE was classified as an emerging market for the first time by index provider FTSE Group last year.  - Reuters