The UAE could see a fresh wave of foreign capital influx that is expected to be triggered by improved investment laws as part of a major restructuring programme in its stock markets, bourse regulators have said.
The Securities and Commodities Authority (SCA), which oversees the country’s stock exchanges, is working on new laws that will attract institutional investors, give rise to market makers and encourage the issuance of more bonds.
SCA’s Chief Executive Abdullah Al Turaifi, quoted by the semi official daily Al Ittihad on Thursday, said he saw no need to establish a separate bonds market in the UAE on the grounds that listed firms can issue bonds within the bourse.
But he noted that SCA and local bourse authorities in the UAE are taking measures to encourage the issuance of bonds to tap the market.
“We intend to issue a set of rules next year with the aim of encouraging institutional investors to enter the domestic market and also entice local companies to list their shares….these rules will develop the market in a way that will allow it to attract a large number of institutional investors,” he said.
“SCA is also conducting a feasibility study to determine the value added of market markers in local bourses…in case the study makes positive recommendations, then we will enact legislation that will allow for the creation of market makers.”
The UAE has the largest stock market in the Middle East after Saudi Arabia in terms of capitalization, which stood at around $125 billion at the end of October. Abu Dhabi’s capitalization stood at nearly $70 billion and Dubai’s at $55 billion while there are a total of 130 listed companies in the two bourses.
The two bourses have been locked in a drive to attract investment and upgrade their global status through the enactment of laws that facilitate dealing, strengthen governance and transparency, and encourage national companies to expand foreign ownership of their shares.
Asked whether it was time to create a separate bond market in the UAE, Turaifi said he saw no need for that market on the grounds listed firms can issue bonds within the bourses as is the case in Saudi Arabia.
“There is no need for a separate bonds market in the UAE…companies wishing to issue bonds can do so in Dubai and Abu Dhabi bourses, which will fully facilitate and support such a process,” he said.
Turaifi said there has been a delay in taking decisions to develop the bourses because of the 2008 global fiscal crisis, which pushed foreign capital out of the UAE. “It was an exceptional event…but we now expect local and foreign institutional investors to come back following the return of stability to the local market and the efforts exerted by SCA regarding new legislations and laws.”