x Abu Dhabi, UAEWednesday 24 January 2018

Investment group fund shuns UAE to list in London

UAE stock markets risk losing companies to global rivals if liquidity and credibility are not improved, says the head of Abu Dhabi Capital Management.

UAE stock markets risk losing companies to global rivals if liquidity and credibility are not improved, says the head of a leading UAE investment group.

Abu Dhabi Capital Management (ADCM), an alternative investment firm, is to list one of its funds on London's Alternative Investment Market (AIM) rather than a UAE bourse.

The company believes local markets do not have adequate liquidity to support such a listing and face numerous other hurdles in attracting business.

"Companies will think twice before listing in illiquid markets like the UAE if the environment stays the same, and opt for initial public offerings in London, Hong Kong and Singapore, which are much more credible and regulated markets," said Jassim Alseddiqi, the chief executive at ADCM.

Financial markets fared badly last year after the Arab Spring and the European debt crisis dampened investor appetite for riskier asset classes. The Abu Dhabi Securities Exchange General Index lost 11.6 per cent last year, while the Dubai Financial Market General Index lost 16.9 per cent.

The value of equities traded shrank by 45 per cent to Dh57 billion (US$15.51bn) last year from the previous year.

ADCM's Qannas fund, which is expected to list on the AIM next month, aims to raise $50 million from international and Gulf institutional investors.

The investment vehicle, regulated by the Jersey Financial Services Commission, will have exposure to Gulf private equity and debt investments and seeks to tap into opportunities in an array of sectors with a maximum exposure of 30 per cent of the overall fund.

"The current regulations in the UAE were not suitable for the proposition we were trying to set up," Mr Alseddiqi said.

"It was an easier process to list in London, the most transparent market in the world, which brings a lot of independence and credibility for our company, not to mention liquidity, " he added.

Qannas has already attracted "strong appetite" from mutual funds and fund of funds so far, Mr Alseddiqi said.

Many UAE companies have looked to London listings recently as drops in liquidity result in lower valuations. Dubai's port operator DP World, listed on the Nasdaq Dubai exchange, sought a secondary listing on the London Stock Exchange (LSE) last June. Dana Gas, listed on the Abu Dhabi Securities Exchange, said it also aimed to seek a dual listing on the LSE in April. Many foreign investment banks have restructured their operations to cope with falling volumes. Egypt's EFG-Hermes, which trades stocks in its home country and the UAE, is "adopting a very aggressive cost reduction plan", Yasser El Mallawany, the company's chief executive, said at the World Economic Forum in Davos, Switzerland this week.

Germany's Deutsche Bank recently moved its head of equity capital markets back to London from Dubai. Nomura, based in Tokyo, closed its Dubai equity research unit, and the UK's HSBC has shut its retail brokerages unit in the Emirates.