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Abu Dhabi, UAEWednesday 12 December 2018

Exclusive: UAE can become listings hub for Middle East and Africa - Franklin Templeton

Executive chairman Mark Mobius says country's bourses should "aggressively" court overseas companies

Mark Mobius, chairman of Templeton Emerging Markets Group, says UAE bourses should "aggressively" court foreign companies to list in the UAE. Simon Dawson / Bloomberg
Mark Mobius, chairman of Templeton Emerging Markets Group, says UAE bourses should "aggressively" court foreign companies to list in the UAE. Simon Dawson / Bloomberg

The UAE can become the listings and equities trading hub for the Middle East by "aggressively" reaching out to entice companies in other territories, particularly in Africa, to list on the country's bourses, according to Mark Mobius, the executive chairman of investment firm Templeton Emerging Markets Group.

Mr Mobius, who helps oversee the Franklin Templeton’s US$29 billion global emerging markets portfolio, said the UAE has the tax and “numerous other advantage” that should help it lure companies from far and wide.

“There are a lot of companies -- you name the country – looking for money, looking for capital," said Mr Mobius in an interview with The National. "[The UAE] is the capital centre and there is a lot of money here.”

“There is no reason why [the country] can’t attract these companies to come here [and list],” he said, adding that the country's main stock exchanges in Dubai and Abu Dhabi should more actively pursue such international opportunities.

“What they've got to do is to go out and solicit, they've got to get investment banks here to go out aggressively to get businesses from other parts of the world.”

One particular geography where the UAE should make exhaustive efforts to attract listings is Africa, said Mr Mobius, with the region increasingly becoming more appealing to global investors seeking opportunities in businesses with good fundamentals.

In order to get exposure to Africa we often go for London listings. There’s no reason why the UAE can’t have a financial centre here that could attract African listings,” he said.

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Initial public offerings (IPOs) have dried up recently on regional stock exchanges, including the Dubai Financial Market and Abu Dhabi Securities Exchange. . Softer economic conditions across the Arabian Gulf have dented investor appetite for new share offerings, while firms looking for higher valuations for their businesses have put listing plans on hold.

GCC stock markets held three IPOs in the second quarter of 2017, compared with two in the same period a year earlier, while proceeds generated from the capital market listings decreased 38 per cent for the period.

Equities capital market activity is expected to get a boost in the UAE with some large IPOs in the pipeline. Dubai-based Emaar Properties, the biggest publicaly-traded developer in the country, announced plans in June to float shares in its real estate development businesses. The offering is expected to be similar in size to its 2014 Malls business share float that generated US$1.58 billion.

Abu Dhabi National Oil Company (Adnoc) may also sell shares in its Adnoc Distribution unit, which includes more than 300 service stations throughout the UAE. The company could be valued at up to $14bn, making it potentially the largest transaction on local equity markets since the Dubai’s DP World listing in 2007, according to Bloomberg.

Such IPOs by local companies are key to the revival and development of local equities markets, according to Mr Mobius, who said Adnoc’s potential listing is an example of “the kind of thing they [UAE] could do” to unlock value.

Regional stock markets have missed out on this year's equities rally in both developed and emerging markets. The US's

S&P 500 Index has hit multiple highs and has gained more than 14 per cent this year, while MSCI's Emerging Index has added more than 30 per cent over the same period.

Stocks in Dubai, by contrast, have risen by just over 3 per cent, with Abu Dhabi stocks down about 1 per cent for the year. Saudi Arabia’s Tadawul All Share Index has also declined more than 3 per cent while the main measure in Qatar is down 22 per cent in 2017.

The best performing GCC bourse this year is Kuwait whose headline index has advanced almost 15 per cent, according to Bloomberg data.

“Generally speaking the GCC markets have under-performed and one of the reason I think is the oil prices,” Mr Mobius said. “That has had a big impact on the mentality of the investors."