DUBAI
To see the UAE’s stock market expand further, one of the world’s leading emerging markets investors has called for a need to encourage increased privatisation and inviting more companies in the region to list in here.
Speaking to the local media on Monday in Dubai, Mark Mobius, executive chairman of Templeton Emerging Markets Group, said that combining the two markets, Abu Dhabi and Dubai, will be “the one step in the right direction” that will likely to lead to more listings.
“And there has to be, of course, more privatisation of assets here — there’s lot of scope to that,” said Mobius.
He also suggested that the UAE markets make efforts to invite companies from the region in the form of ADR or Arab Depository Receipt. Through ADRs, one could get a Saudi Arabian company listing here, which would be a lot more beneficial for international investors. Currently gaining exposure to Saudi Arabia, the Gulf’s largest and most liquid stock market, is through buying Proprietary Notes.
For global investors such as Franklin Templeton, who don’t have a global custodian like a bank in Abu Dhabi or Qatar, they are constrained to buy stocks locally and so, they have to go via London, said Mobius. And from the perspective of the local companies, who prefer to attract a bigger base of international investors, it makes sense to have a listing in a global centre such as London.
In the last few years, especially during the post-global financial crisis period, UAE’s bourses have struggled to persuade companies to launch their IPOs here. Last week, luxury residential property developer Damac started offering GDRs (global depository receipts) in London rather than in the local market, carrying on the trend witnessed earlier, when two Abu Dhabi health companies also listed in Europe’s leading financial capital.
When asked about possible reasons for companies’ reluctance to list in Dubai or Abu Dhabi, Mobius said, “I don’t know why . . . I don’t think many people worked on that.”
From a Saudi Arabian perspective, he explained, it should really not harm them at all and they can allow a company to float 10 per cent of their shares into a depository receipt programme.
“If you get ADRs into this market, you can expand the market here,” the emerging markets votary and investment guru said.
“You approach a Saudi Arabian company, and say, ‘Look, we want to list your depository receipt in Abu Dhabi or Dubai.’ Then I would be able to buy the Saudi Arabian company here,” adding that the Saudi market is strong one.
Merger talk
Talks on the markets of the two emirates working towards a merger by year end gained traction in October after Gulf News reported that the two have started working towards that goal. Reuters said that the two have hired banks for advising them on the merger deal. Going beyond the two bourses in the UAE to merge, Mobius even floated the idea of one single Arab stock market.
There’s no reason why you should have two bourses, he said of Abu Dhabi and Dubai.”
“The two should be merged. There merger makes a lot of sense. You would get a bigger market, more chances of listing new companies. When you get down to it, there’s rationale for the Arab speaking world to have one market.
“Because one of the interesting things is that in this Arab-speaking world, these countries veer towards a freer foreign exchange market. This is quite different from other parts of the world such as China, where they have tight foreign exchange controls,” said Mobius.
While not betting on when the merger of Abu Dhabi and Dubai will finally see the light of the day, he was of the view that it will “definitely materialise.”
“I think as we go forward we are going to see more integration, we are going to see the advantages of a bigger market. It makes a lot of sense. You might have one centre like London, but everybody will participate and have a share in that.”
He further added, “What you need is a market for the big, liquid companies, and you need a market for the smaller, enterprising upstart companies like Nasdaq [in the US]. Of course, Nasdaq has also been transforming.”
