x Abu Dhabi, UAEFriday 19 January 2018

Making it in New York means ADX can make it anywhere

The ADX roadshow brought a very positive message to New York by telling American investors that while exchanges in some emerging markets may be struggling, that is not the case with the UAE.

Rashed Al Balooshi, chief executive of the Abu Dhabi Securities Exchange, second right, and other officials from the ADX roadshow take a tour on the floor of the New York Stock Exchange. Dario Cantatore
Rashed Al Balooshi, chief executive of the Abu Dhabi Securities Exchange, second right, and other officials from the ADX roadshow take a tour on the floor of the New York Stock Exchange. Dario Cantatore

Rashed Al Balooshi, the chief executive of the Abu Dhabi Securities Exchange (ADX), is no stranger to the United States. He studied in South Carolina, and was part of a team of ADX officials that visited New York four years ago.

But when he was once again in the city last week, as the leader of a high-ranking delegation from the UAE aiming to explain the attractions of ADX stocks to US investors, he found that things had changed.

“Four years ago, I had to carry a map of the Arabian Gulf to show them where I was from. Now they say ‘oh, yes, Abu Dhabi, we know that.’ So many of them know so much more about the UAE than before,” he says.

That was a surprise for some in the ADX party. Before they departed, one of their niggling worries was that US investors would be too wrapped up in the macro-issues that, in American eyes, dominate the view of the region, to the detriment of investment prospects.

“The UAE Government has worked hard to educate them, and to put Abu Dhabi at the front of their minds. It was a very successful trip,” says Mr Al Balooshi.

The ADX team on the New York “roadshow” comprised ADX officials and 10 of the biggest corporates listed on the capital’s stock exchange, including such heavy-weights as Etisalat, First Gulf Bank and Aldar.

Their mission was to explain the investment potential of the Abu Dhabi exchange, in the light of very different circumstances from the trip four years ago. Then, the world was grappling with the fall-out from the worst financial crisis in 80 years, and US investors in particular were pulling on their horns for fear of pouring good money after bad in markets they didn’t really understand.

This time, Mr Al Balooshi says, the message from the UAE is different. “We have a very positive story to tell them. American investors know that exchanges in some emerging markets are suffering, but not the UAE,” he says.

It is the first time that the ADX has been able to make the comparison with “other emerging markets”. Last year’s decision by the index compilers MSCI to upgrade the UAE and Qatar exchanges to “emerging” rather than the previous “frontier” status opens up the doors to a whole new class of US and other global investors. The upgrade comes into effect in May, so the timing of the trip was well-judged.

“We had three main arguments: first the strong economies of the UAE and the region. While other countries, like China and India, are witnessing declining growth rates, we are seeing them rise, especially in Abu Dhabi. There is also the matter of the $100 billion or so of investment which is going into the Abu Dhabi economy over the next few years. Corporates in Abu Dhabi are doing very well,” he adds.

That reinforces the second argument he laid out to the US investors. “Dividend yields in the UAE are higher than in the West. Last year we distributed ADX companies Dh17.5bn of dividends, and this year it will be higher. They were surprised by that, they don’t see that from other emerging market funds,” he says.

Thirdly, there is the recent stellar performance of UAE stock markets. Both the ADX and the two Dubai markets have outperformed most other indexes over the past 18 months, and he believes that is a strong attraction for potential US investors. Some, like the big institutional fund BlackRock, have decided to scale back investment in UAE markets, but Mr Al Balooshi believes that is an isolated case. “There are still plenty who want to invest in Abu Dhabi,” he says.

However, the big money funds he met in New York did have some concerns. “They wanted some to open up more for foreign ownership, and others asked some questions about liquidity on the ADX,” he says.

The first issue – most apparent in the case of Etisalat, the biggest constituent of the ADX – is under discussion by the companies themselves. Any change in their status would require alterations to their founding articles and also UAE corporate law.

As regards liquidity, Mr Al Balooshi was impressed by the New York Stock Exchange system of market makers. “We saw it in action and met some market makers. It gave us some ideas how to increase liquidity and add more depth to share dealing at home. It’s already part of our business plan to bring in some form of market making capability,” he says.

On other aspects of stock market practice, he believes ADX is already well advanced. “ADX compares very well in terms of technology, and the trip allowed us to see how solid our systems are,” he says.

The success of the visit to New York will give ADX confidence to plan other such roadshows. “It was very good for us, and really surpassed our expectations. We’re looking to do something similar in London later in the spring, later this year,” he says.


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