x Abu Dhabi, UAE Thursday 20 July 2017

Bourses make changes needed for emerging market status

The country's bourses are moving close to achieving a key classification that could increase their appeal to international investors.

The Dubai Financial Market and the Abu Dhabi Securities Exchange will adopt the delivery versus payment system on April 28.
The Dubai Financial Market and the Abu Dhabi Securities Exchange will adopt the delivery versus payment system on April 28.

The UAE stock markets yesterday moved a step closer to emerging market status after a decision was made to enforce a key settlement system by the end of the month.

The Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX) will adopt the delivery versus payment system on April 28, the country's regulator, the Emirates Securities and Commodities Authority, said yesterday.

With the delivery versus payment (DvP) system, securities are delivered and cash received on the same day. It will help to minimise the risks from the delivery and receipt of securities, the authority said.

It is one of the last components the markets had to address for the UAE to be included on the MSCI emerging market index.

The index, which is tracked by thousands of fund managers and directs billions of dollars worth of liquidity from international investors, classifies six of the Gulf's seven bourses, including the UAE, as frontier markets.

This designation typically applies to less developed, more volatile financial markets from which most international fund mangers shy away. Saudi Arabia is not classified.

MSCI will announce in June whether it will upgrade the UAE and Qatar.

The country's stock market heads welcomed the move and said it would help to funnel international investment into the UAE's markets.

"We hope the new development would contribute in uplifting our markets to emerging market status, which will help attract more international mutual funds," said Essa Kazim, the chief executive of the DFM.

Jeff Singer, the chief executive of Nasdaq Dubai, which has the same owner as DFM and shares the same trading platform, said the decision would boost local exchanges' standards in line with international practices.

Equities listed in Dubai advanced to their highest in two months after the announcement was made. The DFM General Index yesterday gained 0.2 per cent to 1,572.98, the highest since February 16. The ADX General Index was up 0.4 per cent to 2,619.34.

Short selling is planned to be introduced by both markets this year, the exchange chiefs have said. Short sellers borrow and sell an asset hoping to profit by buying it back later for less.

Rashed al Baloushi, the deputy chief executive of the ADX, said in February the exchange was planning to introduce short selling and DvP within a few months.

 

fhalime@thenational.ae