The Abu Dhabi Securities Exchange (ADX) plans this month to host the country's first initial public offering in more than two years, and the bourse's top official says there are "opportunities left and right" for other companies to float.
Rashed al Baloushi, the deputy chief executive of the ADX, also said the exchange was "moving very fast" to satisfy the requirements of the index provider MSCI to enable the UAE to be upgraded to "emerging market" status. He acknowledged the classification would be "very important" to restoring liquidity to local markets and bringing institutional investors back to the UAE in large numbers.
Insurance House, based in Abu Dhabi, will launch a US$16 million (Dh58.7m) initial public offering (IPO) on February 27, with the subscription period closing on March 9. The company is being spun off by Finance House, an investment bank that subscribed to 36 per cent of the company's shares, Finance House said. The offering is available only to UAE nationals.
The IPO announcement comes at a tumultuous time for local markets, as liquidity has dried up and the only announced share sale in recent months was cancelled due to lack of interest. In the past week, the structure of global markets has also begun to change, with several of the top players in talks to merge, including a potential tie-up between the London Stock Exchange (LSE) and TMX, the operator of the Toronto exchange.
The trend has renewed speculation about a potential consolidation between ADX and the Dubai Financial Market, a possibility officials have previously acknowledged was under discussion at the highest levels of government.
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Mr al Baloushi said he did not think the shifting global landscape made a UAE merger any more or less likely.
"It is a move we should not ignore, but the culture is different. It is not apples to apples," he said. "In general, mergers are beneficial. It cuts costs and makes the market more efficient." He said the ADX consulted closely with LSE officials on a range of matters, which "is an advantage for us to see how things are done [in a merger] and what is the process."
In the meantime, Mr al Baloushi said he and other exchange officials were making the case for Abu Dhabi as a site for companies to list their shares and where international investors could gain access to a growing economy.
"Fundamentally, Abu Dhabi is strong," he said, noting high oil prices and low debt levels. "You don't see that trend with the rest of the global economies. Globally, things are not going right."
Mr al Baloushi said he was "concentrating heavily on the awareness programme" to attract a wider range of investors to the bourse and also was reaching out to many of the top family businesses in the emirate to discuss the benefits of going public.
The ADX plans to introduce short selling and the delivery-versus-payment settlement system within several months, he said. The lack of those procedures was noted as a deficiency by the MSCI last year when it maintained its classification of the UAE as a "frontier rather" than an "emerging market".
The MSCI is expected to announce its updated classifications within six months.
Mr al Baloushi said the bourse was striving to address investor concerns while also ensuring the policies it put in place were the best for the long-term health of the exchange.
"You have to remember, we are 10 years old. It was a big and brave move for us to implement disclosure and putting names of insiders on the website," he said. "Moving fast is good, but if you move too fast, it could backfire."