Central Bank intervention to moderate the expanding numbers of new IPO listings in Dubai has paid off, according to HE Sheikha Lubna bint Khaled Al Qasimi, UAE minister of economy and planning.
In her opening speech at MEED’s Middle East Capital Markets Conference in Dubai, Sheikha Lubna said: “The intervention was to prevent open credit extension to potential subscribers of IPOs, it was motivated to check market over-exaggerations and misleading information.
“This measure was truly preventative and well justified. The stock market became less erratic and less jittery but did not lose its energy. It was a win-win situation.”
Sheikha Lubna also touched on amendments to the Company Law which she is calling for to encourage market expansion, most notably to amend the restrictions placed on successful family businesses going public by the requirement that 55 per cent of shares be sold.
“Positive change will be the result if notable family and private businesses go public. It will add huge momentum to the stock exchange, diversify the economy, create wider equity participation and produce resiliency in the market, which will make it much more attractive.”
The number of registered companies on the UAE bourse in 2002 was only 38, with more than double that number now listing. The volume of trade spiralled from Dhs3.86 billion in June 2002 to Dhs215.4 billion at the end of June this year – a 6,000 per cent increase.
“These figures give us the confidence to diversify and deepen our capital market, thus seizing the opportunity to build an even more promising future,” concluded the minister.
Lynton Jones, the new chairman of Dubai International Financial Exchange (DIFX) continued the theme of healthy regional market growth. “The capital markets of the region have grown even more than one might expect from the overall economic picture.
“One reason why is that financial exchanges are still relatively new in the region, so many companies are discovering the advantages of raising money through shares, bonds and other securities, as opposed to the traditional route of borrowing from banks.”
According to Jones, the capital markets structure of the region is ready for a new phase.
“Although the capital markets in the region have shown they can develop new products – the dramatic growth in the issuance of Islamic securities is an example – they have yet to develop some of the products that have proved highly successful in other parts of the world. These include index products, as well as derivatives such as futures and options.”
Jones, the former managing director of NASDAQ International and head of public affairs at the London Stock Exchange, identified Islamic finance as a growth area targeted by the Dubai International Financial Centre (DIFC).
“The global market for Islamic financial products is worth more than $260 billion and is growing at 10 or 15 per cent a year. The DIFC aims to become a centre for product development for Islamic investors and borrowers.
“We aim to be the first exchange to introduce index products to the region – including sharia’a compliant index products. Among our wide range of funds, we plan to list umbrella and hedge funds, while we will also be able to list warrants over equities – again, these will be firsts in our region.
“In 2006, we plan to become the first exchange in the region to list derivatives such as futures and options.”
The Middle East Capital Markets Conference, one of MEED’s signature conferences, is being held at the Crowne Plaza in Dubai, on September 20 and 21. Already confirmed as sponsors are National Technology Group (NTG), Mubasher, HSBC Bank Middle East Limited, Emirates Financial Services; Gulf Investment Services; Jordinvest; National Investments Company; The National Investor, SHUAA Capital; and Cadillac. Additional information can be found on www.meed.com/capitalmarkets
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