x Abu Dhabi, UAEThursday 20 July 2017

Idea of UAE markets merger still alive, Al Mansouri says

Sultan Al Mansouri, the Minister of Economy, hopes a decision on whether to merge the stock exchanges of Abu Dhabi and Dubai will be made by the end of the year.

The UAE has three stock exchanges: the ADX and the DFM, above, into which Nasdaq Dubai, the third market, has been incorporated. AFP
The UAE has three stock exchanges: the ADX and the DFM, above, into which Nasdaq Dubai, the third market, has been incorporated. AFP

Sultan Al Mansouri, the Minister of Economy, hopes a decision on whether to merge the stock exchanges of Abu Dhabi and Dubai will be made by the end of the year.

Executives from the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) have held meetings to discuss a potential tie-up, in an effort to reassure the market that the plans are still being considered, said the minister - who is also the chairman of the Securities and Commodities Authority, the market regulator.

"The deal is not off the table. [The merger] is still being discussed," Mr Al Mansouri said yesterday on the sidelines of the XBRI24 business conference in Abu Dhabi.

"It is a very important step, from our point of view, but it needs to be done properly and in a very wise and systematic way that serves, at the end of the day, the interest of both stock markets. I do hope we will be able to receive some kind of indication before the end of this year, 2012," Mr Al Mansouri said.

Speculation over such a deal first surfaced in May 2010, but no progress has been made public since the initial announcements from both bourses.

The UAE has three stock exchanges: the ADX and the DFM, into which Nasdaq Dubai, the third market, has been incorporated. While they do not compete directly in terms of listed stocks, they seek liquidity from the same pool of investors.

Exchange officials declined to comment. Rashed Al Baloushi, the chief executive of the ADX, said in May 2010 that he was in favour of a merger, however.

At about the same time, Essa Kazim, the chief executive of the DFM, said "it is in the interest of everybody to consolidate".

"This is one of the industries where you always gain from merger, as consolidation lowers your marginal cost," he said. "It's an engine that is running, and if you populate it with more listings, the marginal cost of extra listings will go down."

A committee that includes officials from the ADX and the DFM is expected to report to the Ministry of Economy and the market regulator after completing discussions and finalising outstanding points, Mr Al Mansouri said.

"We will then evaluate and make the right decision about the best way forward," he said.

Mark Mobius, the executive chairman of the asset manager Templeton Emerging Markets Group, said the bourses needed to merge to benefit from improved resources and greater efficiency.

"There is no reason to have a stock exchange in Abu Dhabi and two in Dubai," said Mr Mobius. "Even better, if you combined the exchanges across the Gulf region - Qatar, Saudi, Kuwait, Oman - you could still have trading floors in each country. What's stopping it happening is really a political issue. Foreign investors can ask for it, but the push really has to come from within."

The UAE needs to take some lessons from Latin America, said Mr Mobius. Exchanges in Colombia, Chile and Peru are consolidating across the Spanish-speaking nations. "This region shares that advantage but with Arabic," he said.

What is more, two of the capital's biggest developers, Aldar Properties and Sorouh Real Estate, this month announced they were preparing a study into a merger to be put before both their boards within three months. Abu Dhabi property developers were hit hard by the global financial crisis that began in 2008, with prices tumbling by as much as 60 per cent from their peaks in some places.

"Consolidation should not just happen at the level of financial markets but to companies as well to strengthen sectors and positions of companies, given the situation of the economy," Mr Al Mansouri said. "Look at the financial sector, from the banks' point of view, for example. Any sector that faces challenges, one way out of them is … consolidation."

halsayegh@thenational.ae

lmiller@thenational.ae

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