The UAE is seriously considering merging its two main stock exchanges to boost investment in the local capital markets and attract greater foreign investment to the Emirates.
The rumour of a state-backed deal to merge the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX) has made the rounds since 2010. However, the deal has faced complications over the process of valuation and the fragile economic situation in the aftermath of 2009-2010 corporate debt crisis. In recent weeks, government officials in Abu Dhabi and Dubai have again held talks to consolidate the equity markets to become more competitive globally.
A source close to the deal has informed Reuters; “The entire valuation, structuring of the deal is done. It’s been an ongoing process and the decision is now pending at the highest levels in the two Emirates. It’s not a question of whether they would do it now. It’s a question of when.”
The DFM, the only listed Gulf stock exchange, has a market value of USD 4.4 billion. The exchange has shown stellar performance, almost doubling this year, as Dubai shows signs of economic recovery.
Although Abu Dhabi and Dubai are viewed as fierce competitors in the financial markets, the two Emirates have cooperated with each other on several occasions. Abu Dhabi bailed out Dubai with a USD 10 billion loan during the debt crisis, while the two Emirates also recently merged their state aluminum producers.
The bourse, likely to be named Emirates Bourse, is expected to be owned 45 percent each by the Abu Dhabi and Dubai governments. The remaining 10 percent would be owned by minority shareholders. The merger is expected to benefit the capital markets in the Emirates by providing greater depth and providing greater confidence to foreign investors.
Last week, the UAE’s equity market was upgraded to emerging market from frontier market status, a move which is expected to pull investment of several millions of dollars towards the Emirates.