Dubai Financial Market Company shares climbed more than 14 per cent yesterday to touch their maximum price ceiling on speculation about an emerging markets upgrade and a potential merger with the Abu Dhabi Securities Exchange.
"Investors are buying shares as the deadline for reclassification draws near and at the same time there is widespread speculation with focus returning to the merger between the two markets as valuations and liquidity improve," said Wadah Al Taha, the chief investment officer at Dubai-based Al Zarooni Group.
Shares of DFM Company, the only bourse in the region to sell its shares to the public, closed at Dh1.87 each yesterday. The shares have surged by more than 41 per cent since May 26.
The UAE is under review this month for a potential upgrade from its current frontier status by MSCI, whose indexes are tracked by investors managing US$7 trillion of clients' money.
"DFM is a liquid stock and would benefit from direct inflow with a potential inclusion into the emerging markets index," said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi.
Analysts at HSBC said there were "mildly positive" signals for a reclassification of the UAE bourses - the Abu Dhabi Securities Exchange, Dubai Financial Market and Nasdaq Dubai.
They "have begun to address their respective market accessibility issues in an attempt to satisfy global investor needs," HSBC's Vijay Sumon and Joaquim de Lime said in a note to clients.
Separately, a column in an Arabic daily called for a merger of the ADX and DFM, reigniting interest in a union first mooted three years ago.
Sultan Al Mansouri, the Minister of Economy, in March last year reassured the market that the plans were still being considered.
"The deal is not off the table. [The merger] is still being discussed,"" he said in an interview with The National at the time.
The market regulator, the Securities and Commodities Authority, in addition to the ADX and DFM declined to comment when contacted by The National yesterday.
"From an investors' point of view, we prefer to deal with one platform that has harmonised regulations and policies," said Tariq Qaqish, the head of asset management at Al Mal Capital, a Dubai-based investment bank. "It would concentrate the liquidity in one market."
The markets have benefited from a trading bonanza over the past year, amid renewed investor interest, boosted by a strong economic recovery and an uptick in merger and acquisition activity in bluechip companies.
The ADX General Index has risen more than 36.4 per cent this year, while the DFM General Index has gained almost 50 per cent in the same period.
"Confidence is back, people have a feeling that things are back on track," said Fathi Ben Grira, the chief executive at Abu Dhabi-based Mena Corp. "Brokers usually open between 50 to 100 accounts a month, but we opened 1,200 last month and more is yet to come."