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18 April 2024

ADX aims to be most active bourse in region

The Exchange recorded one of its busiest years in 2008. (FILE)

By Nadim Kawach
The Abu Dhabi Securities Exchange (ADX) said yesterday it was pushing ahead with plans to introduce exchange trade funds (ETF) and derivatives within a long term programme to become one of the most active bourses in the region.

ADX Chief Executive Tom Healy said the bourse recorded one of its busiest years in 2008 despite a sharp fall in its market capitalisation, with the value of traded shares surging by nearly 32 per cent over 2007.

In a statement about ADX's performance in 2008, Healy spoke about progress in the Exchange's plans to increase institutional investors as their number jumped by around 34 per cent last year, adding this would help stabilise the market.

"In line with our five-year strategy and the Government's Economic Vision: 2030, ADX will continue to focus on diversification and sustainable growth so we reach our goal of becoming the market of choice in this region," Healy said.

"Our priorities for 2009 are to develop markets for exchange traded funds, debt securities and derivatives as well continuing to enhance transparency and the regulatory environment for the benefit of all our stakeholders."

In an interview with Emirates Business last year, Healy said ADX had already taken a decision to introduce ETFs, derivatives and other sophisticated investment instruments as part of plans to develop the market in the long run.

Another ADX official said the aim was to turn the bourse into a global market and lure in more foreign investors to stimulate share dealing. ADX Deputy Chief Executive Rashed Al Baloushi said such investment tools are idea for the local market as they allow investors to diversify their portfolios and less risks, adding the Exchange will decide what type of ETF should be traded.

"ETFs have proved themselves to be popular with both retail and institutional investors and we would like to give investors the opportunity to trade ETFs on ADX," Al Baloushi told a recent stocks conference in Abu Dhabi.

"Not only are they a way of diversifying, but they tend to be more cost-effective than mutual funds, as well as more accessible, flexible, liquid and transparent… ETFs are ideally suited to our retail-heavy market… They will give investors the opportunity to diversify therefore spreading their risk. ETFs may also encourage international investors to look at our market."

Figures provided by Healy yesterday showed turnover, or the value of traded shares, surged by 32 per cent to Dh232 billion during 2008 from Dh175bn in 2007. But the volume of shares dropped by around four per cent.

"2008 also saw an increase in investors from around 860,000 in 2007 to nearly 877,000 in 2008 and, of particular importance, was an increase in activity from institutional investors," Healy said. "Increasing institutional participation is an important objective for ADX as it will stabilise the market in the longer-term… The number of institutional investors increased 34 per cent from 1,623 in 2007 to 2,472 in 2008 and their trading value rose from 26 per cent to 32 per cent of total market trading value."

He said the proportion of shares owned by foreign investors declined in 2008, accounting for nine per cent compared to 13 per cent in 2007. Investors from Britain remained the largest after UAE nationals, followed by investors from Qatar, Saudi Arabia, Kuwait and Luxembourg. "Despite the increase in 2007 and subsequent decrease last year, foreign investors have always been a relatively small part of the ADX market."

Healy said he believed ADX made considerable achievements in 2008, referring to what he termed as initiatives to provide greater transparency and improved corporate governance to ADX.

Trading value falls 43%

The Abu Dhabi bourse said the value of stocks traded on the
exchange plunged about 43 per cent in the second half of 2008 during a global stock market rout that witnessed foreign investors exit en masse.

Total stocks traded in the six months to December 31 were worth Dh70 billion ($19.06bn), down from Dh123bn in the year-earlier period, the Abu Dhabi Securities Exchange (ADX) said in a statement.

The proportion of shares listed on the exchange held by foreign investors fell to nine per cent in 2008 from 13 per cent a year earlier, the exchange said in a separate statement.