Dubai: The UAE stock indices rallied by more than 0.50 per cent on Tuesday, continuing their bullish momentum of recent days. The gains were led by banks and real estate companies, on both DFM and ADX.
The stocks that contributed most to gains are Emaar Properties, Emirates Integrated Telecommunications and Emirates NBD on DFM, while FAB and Aldar Properties pulled up ADX.
A major news of for the day was ADIB raising the foreign ownership limit to 40 per cent from 25 per cent. This year Dubai Islamic Bank had also announced an increase to the foreign ownership limits, but data suggests that the limits have not been legally raised.
Others to have higher foreign exposure limits are Agthia Group and Methaq Takaful Insurance. It’s debatable on whether raising these limits will make any practical difference.
No quick take up
A study of listed companies for which information is available suggests that on an average 26 per cent per company of foreign ownership limit is left unused across DFM and ADX companies. This includes some of the blue-chips like Etisalat, FAB and Emirates NBD.
In fact, UAE’s largest company Etisalat has a 20 per cent foreign ownership limit, but only 4.97 per cent has been used up. A glance of DFM listed companies will reveal that only 18 of the 66 listed companies have seen a rise in non-UAE nationals’ stakes. while the remaining have either seen a decline or remained at the same level.
This suggests that more aggressive marketing measures are needed to boost the presence of foreign investors and make them a part of benchmark indices.
ADIB’s is not likely to have a major impact in the near term, but is a step in the right direction as it is likely to boost liquidity and valuation multiples in the long-term.
- Vijay Valecha is Chief Investment Officer at Century Financial.