Author Name: Rashed Al Baloushi, CEO, Abu Dhabi Securities Exchange
1. Could you give us a bit of background about your exchange?
The Abu Dhabi Securities Exchange was established in November 2000 for the trading of securities including shares issues by joint stock companies., bonds, sukuks issued by governments and corporations, as well as ETFs and other financial instruments approved by UAE SCA. Its market capitalisation as at 31 December 2013 was AED 402.2 billion/USD 110.2 billion (an increase of 57% over 2012) and its total turnover was almost AED 85 billion/USD 23.29 billion.
There are 67 stocks listed on ADX, with 65 companies, one ETF and one convertible bond. Seventeen companies are in the insurance sector, while 14 are in the banking sector and 13 in the industrial sector. In 2013 Morgan Stanley Capital Index (MSCI) upgraded both ADX and DFM, the two local UAE markets, to Emerging Market status, which will take effect from May 2014. This decision followed significant progress made by the markets in a number of specific operational and legal requirements. S&P Dow Jones also announced in 2013 that it was upgrading the UAE markets to Emerging Market status by September 2014.
2. How active are foreign investors in your exchange? How accessible is your market?
A number of listed companies allow a proportion of their stock to be held by foreign shareholders, with the proportion varying from 25 up to 49%. There are no pre-investment approvals required for foreign investors in ADX listed companies, and the market is open to all shareholders who wish to purchase shares in listed companies which allow foreign shareholdings. We have implemented a number of improvements in the past year to make the market even more attractive to foreign investors. For instance, in May last year we implemented a Delivery versus Payment system to allow payment for securities at the time of delivery. The system stipulates that cash payment is made prior to or at the time of delivery of the security. We also introduced the Extended Business Reporting Language (XBRL) platform in collaboration with listed companies regarding the disclosure process. XBRL is used in many countries with more advanced markets in facilitating data reading for investors and other interested parties. ADX also introduced an SMS text message service for recipients of our clearing, settlement and depositary departments' services.
3. What new projects/products are you currently working on?
We will also very shortly be launching the Nasdaq OMX X-Stream trading platform, which we have been trialling and testing over the past 2 years. This is a proven multi-asset trading solution that combines exceptional performance with adaptability. The new platform will provide ADX with a proven and functionally rich multi asset trading system that complies with international standards and policies. The platform will handle the trading of equities, fixed income and ETFs and provides the possibility of introducing additional instruments. The introduction of this new platform and the functionalities it offers will create advantages for both regional and international investors.
4. What are the challenges you see in your market today and in the future?
The most recent challenge has been the relatively lower attraction of equities as an investment as compared with other avenues available to local and international investors. This has impacted on the pool of liquidity available to energise the turnover of shares on the market, and to provide the right level of encouragement for companies to consider ADX as the ideal option for IPOs and local listing. However, the current resurgence of the UAE economy and the growing appetite among local companies to seek new capital as part of their growth plans, as well as the MSCI upgrade, are all promising indicators for ADX in the coming year. As a result we saw a 68% increase in the market last year. We see it as only a matter of time before local companies start to activate their indicated floatation intentions.
5. How do you assess your exchange`s position at a time of increased globalization?
The upgrading of the exchange to Emerging Market status is a key event in our journey. We have worked very hard to meet the standards required to reach this point, and the result will be the inclusion of ADX in a wider range of investor portfolios than has been the case hitherto. While the immediate inflow of investment will be measured, we anticipate that this is a tipping point and that the upgrading of the market by both MSCI and S&P, plus the improvements that we have put or are putting in place to meet investor expectations will drive our growth in the year ahead. That, as well as the central role that ADX plays in supporting the Abu Dhabi Economic Vision 2030 in helping to build a sustainable, diversified and knowledge based economy, positions the exchange ideally in terms of the globalisation of Abu Dhabi itself.