Dubai plans to list 10 state-owned companies on its stock exchange to boost the size of its financial market to AED3 trillion ($817 billion) as the Middle East’s business hub seeks to catch up with Abu Dhabi and Riyadh.
The emirate’s deputy ruler Maktoum bin Mohammed bin Rashid announced the plan at his first meeting as the head of the securities and exchange higher committee, without providing a timeline for the listings. He also approved a AED2bn market-making fund to increase liquidity and a AED1bn fund to support tech IPOs.
The city’s stock exchange surged over 2 percent on Tuesday and bourse operator Dubai Financial Market PJSC soared 14 percent. While it’s not yet clear which state-owned firms will be listed, some key assets include Dubai Electricity & Water Authority and Emirates Airline, whose top officials have said in the past that a decision to IPO rests with the government.
. @MaktoumMohammed chairs the first meeting of the Securities and Exchange Higher Committee, announces listing of 10 government and state-owned companies on #Dubai Financial Market. pic.twitter.com/XR8n1vMyOc
— Dubai Media Office (@DXBMediaOffice) November 1, 2021
“More government listings might help DFM trading volumes pick up, similar to Abu Dhabi, but the question remains why more private sector corporates do not see the DFM as a useful avenue to raise finance,” said Hasnain Malik, the Dubai-based head of research at Tellimer Research. “The main drivers of Dubai stocks remain the recovery in tourism and deregulation of long-term residency.”
The announcement comes as Dubai tries to revive a flagging stock market. The city has so far missed out on the IPO boom in the Middle East, with just one company going public since 2017. Its only prospect of a listing this year failed when logistics firm Tristar Transport pulled its IPO in April.
Demand for new stocks has been through the roof in other Middle Eastern marktes. Investors placed more than $34bn of orders for Adnoc Drilling’s $1.1bn IPO in Abu Dhabi, while Arabian Internet and Communications Services Co. attracted a whopping SR471bn ($126bn) in bids for its $966m offering last month in Riyadh.
Dubai, on the other hand, has seen a series of delistings – from port operator DP World to Emaar Malls and Damac Properties – driven by sluggish trading, a slump in prices and liquidity, and a desire by companies to escape investor scrutiny in a falling market at the time.
As real estate prices have started to recover, Dubai’s benchmark index has eked out gains, but it still trails peers in Abu Dhabi and Saudi Arabia. Traded volumes and its market capitalisation are also lower in Dubai.
The benchmark Dubai Financial Market General Index’s market capitalisation currently stands at more than AED500bn, according to the exchange’s website. An average of 139 million shares were traded daily in the past 12 months and the most active stocks include banks and real estate.
“It’s quite an ambitious target, but it’s definitely a move in the right direction, and any new listings would be welcomed by the market,” said Salah Shamma, Franklin Templeton’s Dubai-based head of equity investment for the Middle East and North Africa. “There is enough investor appetite and liquidity.”
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