Dubai: Which will be the next public-listed company in the UAE to do an Emaar? That is, allow foreign investors to – theoretically – allow 100 per cent ownership?
This has become the big guessing game among stock market analysts – and investors too. “Because typically, stocks that remove foreign ownership limits get an immediate price boost,” said an analyst. “That means an opportunity for existing investors to cash in.”
Emaar’s stock – and its shareholders – sure got that. It shot up more than 4 per cent and past Dh6 a share mark, before investors engaged in some profit taking on Friday. The stock will start this week at Dh6.10. (Emaar’s 52-week high is Dh6.47.)
Incidentally, Aramex and ADNH (Abu Dhabi National Hotels) were the ones who brought the foreign ownership cap removal into the spotlight. Emaar’s step – which needs to be ratified by shareholders on September 21 at a general meeting – took that process a whole lot forward.
In early trading, DFM is down 0.78 per cent and ADX by 0.893.
The same message has been taken badly by global investors, and Asian stocks dropped quite a bit to mirror what the Dow experienced Friday.
The same sentiment is shaping up on the UAE stock markets, and it might need some movement on the oil side before investors shed their edginess.
The next US Fed rate hike is due in September.
Aramex and ADNH have certainly seen higher average daily trades post the announcement to increase FOL (foreign ownership limits),” said Junaid Ansari, Head of Investment & Strategy at Kuwait-headquartered Kamco Invest. “Average daily value traded for Aramex increased from Dh7.7 million between January 2022 and May 29 to Dh10.7 million post the announcement on May 30 until August 24.
“Similarly, for ADNH the average daily value increased form Dh1.1 million to Dh4.3 million during the same period.”
We believe that a higher foreign ownership limit benefits large-cap liquid stocks more than small and mid-caps stocks
Show up strongly on global indices
For Emaar Properties, a go-ahead from shareholders on 100 per cent foreign ownership approval also means a chance to figure prominently in global stock market indices. “It’s already the highest traded stock on DFM, has the sufficient profile as developer leveraging the boom in Dubai property market sales,” said an analyst. “The removal of the FOL is a chance to show up more frequently in global investors’ stock picks.”
Which is why more listed companies will opt for the same. And add to the liquidity in UAE stock markets. “It does help UAE (stocks) be part of global indices,” said Vijay Valecha, Chief Investment Officer at Century Financial. “But the bigger picture is that the UAE is giving everyone an opportunity to invest and grow – that’s always been part of the UAE vision.”
How about other Gulf stock markets?
Saudi Arabia allowed 100% FOL on listed companies since June-2019 after the FSI (Foreign Strategic Investor) instructions became effective. “However, most of the listed REITs (Real Estate Investment Trusts) have 100 per cent FOL in Saudi Arabia while most of the companies have it at 49 per cent,” said Ansari.
“Bahrain and Muscat exchanges were at the forefront in the GCC with respect to FOL allowing 100 per cent ownership by foreigners. However, bulk of the exchanges have a virtual cap of 49 per cent.
“We believe that a higher FOL benefits large-cap liquid stocks more than small and mid-caps stocks, and especially companies that may potentially seek to raise additional capital in the future.”
Emaar, on September 21, will also seek approval for a convertible bonds issue to part-finance the Dh7.5 billion acquisition of Dubai Creek Harbour development that it doesn’t already own.
It's only a question of how soon other listed UAE companies will go the same way as Emaar is doing on 100% foreign ownership