There was a palpable feeling of relief at Nasdaq Dubai this week with the announcement that, at last, after more than five years and several false starts, it had a new listing.
Bank of London and the Middle East (BLME), the biggest independent Islamic banking business in Europe, intends to list its shares next month, with a chunky market capitalisation of about US$500 million, making it one of the bigger stocks on the exchange.
It is good news for ND. The last real listing, of the jewellery group Damas, came in July 2008, which with hindsight was awful timing. Just before that there was the interiors group Depa, then you have to go all the way back to DP World in December 2007.
None of these have traded particularly well on the exchange (although in the case of since-delisted Damas the poor performance was for reasons mainly outside ND’s control).
But there was a feeling that, with global indexes (including the UAE 20 Index, which partly reflects the state of health of the ND market) heading upwards again, BLME was an opportunity to start over, maybe even catch the rising tide of world equities and become a proper exchange again.
All that is possible, and anybody involved with the Dubai financial services industry must hope that it is so and wish ND well.
But one swallow doesn’t make a summer.
In the case of BLME, there must be reasonable doubt that the issue will be swallowed at all, with the risk it might just languish on ND, unloved and illiquid, just like the other seven stocks there (with the partial exception of DP World.)
It must be said there is nothing in BLME’s fundamentals to cause that concern. The management looks sound, as are the financials. The strategy of “bridging the gap” in Islamic business between Europe and the Gulf also has potential, as the Sharia-compliant world moves up a gear, and Dubai seeks to be its global hub. All that is good.
The valuation also seems reasonable. Whether measured by the criterion of previous (private) share trades by its mainly Kuwaiti shareholders, or as a ratio to book value, the price of $2.57 per share does not seem expensive.
Rather, it is the circumstances of the listing – at least as explained by management – that causes some concern. Some of BLME’s original shareholders, going back to when it was sponsored by Kuwait’s Boubyan Bank in 2006, obviously want to get out. The estimate was between 5 and 15 per cent of the total, with an unspecified percentage also looking to buy.
That might ensure a healthy few hours trading on the first day, but what then? Unless BLME can tap into a new flow of Islamic products from Dubai (which is a possibility) there seems little to attract UAE investors into the stock.
Of course, its listing might tempt Kuwaiti, and other Gulf or international investors in, but that is by no means a certainty, given the regional dynamics.
So ND would be unwise to proclaim the end of the doldrums just yet, at least on the evidence of the BLME listing. Exchange insiders say there are others planning real initial public offerings to raise new money (unlike BLME), and that could be true.
But there have been so many false dawns at ND over the past few years that it would be premature to herald the start of a new era. Let’s wait and see the identities of the corporates, their prospectuses and financials, and above all get their shares trading, before that.
Meanwhile, ND has got quite a lot of other issues to be getting on with. We still await implementation of the plans announced earlier this year to provide a market for sukuk trading, and to become a platform for financing SME business in the emirate.
And at ND’s back – indeed looming over the whole DIFC – is Abu Dhabi’s plan to set up its own financial free zone. Competitive or cooperative, it’s an issue that has to be dealt with.
So, well done ND, and good luck BLME. But let’s just hold the celebrations awhile.