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Friday, December 6, 2019

Positioned for growth

by Joanna Andrews

© Woulter Kingma Productions: Hamed Ali

NASDAQ Dubai has a new man at the helm. Hamed Ali took over in August 2012 from Jeff Singer as Acting CEO of the  region’s international exchange. His mission is to lead the next phase of growth.  Joanna Andrews went to find out what’s in store for the exchange in the year ahead

Hamed Ali is a seasoned markets man. He was the former Chief Operating Officer (COO) at NASDAQ Dubai and was Executive Officer from 2006-2008. He also served as COO of the Dubai International Financial Centre (DIFC) Authority. His experience of meeting the region’s financial needs includes helping to manage the listing of DP World in 2007 – the Middle East’s largest IPO, just shy of $5 billion. He also played a key role in the development of the Dubai Strategic Plan 2015 and participated in a number of strategy development exercises.

NASDAQ Dubai is the international exchange for trading equity and other securities in the UAE and the rest of the Gulf Cooperation Council (GCC), the wider Middle East and North Africa, Turkey and the Indian sub-continent. The exchange is committed to creating wealth for the UAE and the region.

Hamed Ali told Joanna Andrews about the exchange’s plans to expand NASDAQ Dubai’s equities market, together with its equity derivatives offering and its Sukuk and conventional bond market.  

How are you going to attract more big IPOs like DP World?
After a quiet four years for the capital markets because of international and regional volatility, conditions are improving and NASDAQ Dubai is well placed to fulfill its role as the region’s premier exchange. We are successfully promoting the message to regional companies that NASDAQ Dubai offers all the benefits of a listing on an international exchange, without the need to go overseas. This means that companies can obtain investment from around the world and also from their own region, through an exchange in their back yard where the market knows them well and understands them.  We are on a mission to educate high quality regional companies about how to prepare for life as a public organisation, such as formalising their management structures and ensuring that effective corporate governance is in place. Then the owners of those companies can raise the capital they need to grow as they deserve to.

What sort of companies are suitable for an IPO on NASDAQ Dubai?
Large conglomerates and government and semi-government entities are very suitable. We believe the benefits we offer will attract a national champion to come and share its story and its business success with regional and international investors. We are a society that likes to talk to each other and share experiences, so once we have enough companies, then we will see more and more come to the market. We need a first mover, and we as an exchange are being proactive to achieve this.  In addition small and medium-sized enterprises, which often have the potential for high growth, can benefit from listing on the exchange and we are seeing increasing interest from this sector.

 We are also going beyond the UAE to companies overseas that will benefit from listing here. We use Dubai’s credibility plus our connectivity to the international markets; that is a beautiful model. It would be selfish to think that only companies in the UAE can benefit. But our initial focus is the Middle East.  

Why should a firm list on NASDAQ Dubai instead of another local exchange?
Companies that are ambitious and successful appreciate the links that we provide to investors everywhere, who could potentially be the same people they are doing business with. So if you are a company that is active across the Middle East, or Europe, Asia and Australia for example, you want visibility in specific regions, you don’t want to be limited to the UAE only. In addition to that, a NASDAQ Dubai listing gives levels of transparency and corporate governance that are equivalent to those on other international exchanges. If a company lists on NASDAQ Dubai, it is in a good position to also list on any European exchange, for example, within a reasonable timeframe.

 In addition we offer specific advantages over many regional exchanges such as a ‘book build’ IPO, in which the company can sell its shares at their market value, rather than a fixed valuation that could be lower. And owners can retain control of the company, as no more than 25 per  cent of the shares need to be sold.

Dubai SME and NASDAQ Dubai have just signed agreement. Is this where you see growth?
The agreement underlines our commitment to promote the expansion of high quality small and medium-sized enterprises (SMEs). Dubai has always incubated new ideas and businesses. The growth of the SME sector is critical to Dubai’s ongoing economic success, including job creation and further upgrading of the skills of the workforce. Dubai has more than 72,000 SMEs, contributing over 40 per cent to its GDP and accounting for 42 per cent of employment. The exchange provides an ideal platform for SMEs to raise capital to fund their growth plans locally, regionally and internationally.   

Are NASDAQ Dubai’s standards comparable to global exchanges in Hong Kong, London or New York?
In terms of infrastructure, teams and the way we do business, our policies and procedures, our regulations, our laws and the listing rules, absolutely yes! We are modeled after the best global practices that are relevant to this region. Now can you compare those exchanges to us in every way? No. We have a unique advantage; we are in a region that happens to be one of the wealthiest in the world, measured by natural resources and per capita income. People are looking for investment opportunities in our region where they can diversify. Now is the time, as Western markets have serious problems and are less appealing than they were.

So we are well placed to further increase the investor population on the exchange, both international and regional, and this will increase liquidity. We already offer market makers and liquidity provision and so on, but one thing that really helps the liquidity of any exchange is to increase the investor base. We believe that through our combination of international institutional and regional individual investors we already have the highest potential investor base in the region, but we are not complacent, we want to outshine and outdo ourselves.

What new products do you have in the pipeline?
We will be offering a diverse range. Fixed income is very important. In 2006 we were the world’s biggest Sukuk exchange by value. We want to be there again through new listings. We will be very aggressive to make sure we meet that target. We will also take active steps to expand our equity derivatives market, which has enormous potential as a hedging and investment tool.

Do you think that because of the debt crisis in the West, Dubai is becoming a safe haven destination for investors?
I think Dubai is benefiting not only from problems in Europe, but also at the regional level. This is reflected in Dubai’s overall success in many sectors, not just in capital markets. Dubai is rightly seen as one of the world’s most attractive business destinations, reinforcing the positive reputation that it has built up over decades.

Your predecessor Jeff Singer called for the UAE’s three exchanges to merge some of their operations. Do you agree that consolidation is needed?
Consolidation is not the only solution. You can achieve the same benefits by some form of collaboration. The best example is what NASDAQ Dubai and Dubai Financial Market have done, allowing investors to access both through the same trading platform; with the added benefit of international investors, in the case of NASDAQ Dubai listed companies.

 What is needed is for regional harmonisation in regulation. All three UAE exchanges need to look at how we can use the capital markets and regulatory environment to increase the GDP of the country.

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