Dubai investors are pinning their hopes on the merger of the emirate's two stock exchanges next week to help reverse the biggest losses among Gulf bourses in the first half of the year. The Dubai Financial Market (DFM) General Index has fallen 18.58 per cent in the first half, which ended on Wednesday, almost double the loss at any other bourse in the region. The merger of the two exchanges, which is scheduled to take effect on Sunday, is designed to attract increased liquidity and eventually boost share prices.
"This consolidation is unique in the GCC. It will bring together the investors from both exchanges on one trading platform, driving liquidity growth and creating a powerful listing and trading hub," said Jeff Singer, the chief executive of NASDAQ Dubai. Traders and analysts also believe the merger has the potential to breathe life back into what have become the most moribund exchanges in the region.
"The idea of bringing all equities together under one umbrella and on one platform is good and will work in favour of the market," said Chahir Hosni, the equities sales manager at EFG-Hermes in Dubai. Trading on the DFM platform will heighten the visibility of NASDAQ Dubai's 14 listed companies to more than 500,000 DFM retail traders. On the flip side, DFM is expected to benefit by hosting shares of DP World, which is arguably the UAE's most prominent public company.
In recent months, NASDAQ Dubai equities have been largely shunned by retail investors who prefer to trade on the DFM, which has more stocks and greater liquidity, enhancing their chances to book intraday gains. On some days at NASDAQ Dubai, DP World is the only share traded. Fadi al Said, a senior fund manager at ING Investments in Dubai, said the unified bourse was "a good step in the long term", but he did not foresee an immediate impact because the global financial downturn continued to weigh on regional markets.
"There is hardly any appetite for risk in the market," he said. One near-term benefit for traders will be access to live quotes for NASDAQ Dubai shares. At the moment the bourse charges those who want live data on stock prices between US$10 (Dh36.72) and $15 a month. The free quotations come with a 15-minute delay. On the DFM platform, all live data is free. "Once it's available and free on one trading platform [retail traders] will most likely jump in because the information is ready, live and available," said Saad Chalabi, an institutional trader at AlRamz Securities based in Abu Dhabi.
Another possibility is that private equity firms will look to list shares on the combined exchange. Several firms have said recently they are intrigued by the possibility of listing on NASDAQ Dubai, where a company is required to float only 25 per cent of its shares, and still gain access to the greater liquidity of the DFM. Some firms have avoided listing on the DFM because it requires a company to float at least 55 per cent of its shares.
The date for the combined exchange was pushed back from June 27 to July 11. A spokesman for NASDAQ Dubai said yesterday the bourse was still awaiting final approval from the Dubai Financial Services Authority. * with reporting by Hadeel al Sayegh email@example.com