Abu Dhabi's stock exchange will be the centrepiece of the new financial centre being built on Sowwah Island. Lee Hoagland / The National
Abu Dhabi's stock exchange will be the centrepiece of the new financial centre being built on Sowwah Island. Lee Hoagland / The National

Bold action on UAE markets structure crucial for vitality



What can get UAE financial markets out of the doldrums? It's a question vexing the best business brains in the country, and there are no easy answers.

The main indexes for the three stock markets in the Emirates are hovering near all-time lows. In Abu Dhabi, as in the two markets in Dubai, investment activity has been virtually becalmed all year, with volumes at derisory levels and prices sliding inexorably downwards.

It has to be said that financial markets are not the main indicators of the UAE's economic health. They take a back seat role in that respect to the oil price, still the most crucial factor, even in virtually oil-less Dubai, and to property prices.

Nor is there any real "coupling" between the financial markets, oil and property. When oil and property prices were soaring in the couple of years running up to the crisis of 2008, financial markets went their own way, with a big slump in 2005-06 and no real recovery, even in the boom years.

But the UAE has put so much store in the attractions of financial markets that it really has to make a go of it. In Dubai, the multibillion-dollar investment in the Dubai International Financial Centre has to be exploited. Any serious financial centre - New York, London, Hong Kong, Frankfurt - revolves around a thriving market for equities and derivatives, but both Nasdaq Dubai and the Dubai Financial Market have been poor reflections of those global hubs.

In Abu Dhabi, the stock exchange will be the centrepiece of the new financial centre being built on Sowwah Island, itself integral to the UAE's strategic development plan. But unless market activity picks up, it will be a hollow achievement.

It should also be pointed out that the position of regional financial hub is seriously up for grabs. Trouble-torn Bahrain has slipped back in the race, but energy-rich Qatar has shown new ambition to be the Gulf's premier financial centre. The UAE is generally reckoned to have a 10-year start over its rivals, but that could be whittled away if the current depression continues. It is crucial that financial market activity in the emirates is encouraged and stimulated with urgency.

Some factors are outside the control of the policymakers. Heightened global financial worries, with a crisis in the euro zone, fears about the post-crisis resilience of the US economy, and fresh concern about the Asian economic powerhouses have meant that all markets, even the strongest, such as those mentioned above, have struggled since the beginning of summer.

Regionally, those negative influences have been aggravated by the uncertainty caused by the fallout of the Arab Spring.

Corporate mergers and acquisitions activity has been, literally, decimated.

Another factor outside the UAE's control is the issue of whether the Emirates' markets are included in the emerging market (EM) category of the Morgan Stanley Capital International (MSCI) indexes. In late spring, MSCI put off a decision until early next year.

Abu Dhabi and Dubai have largely addressed the concerns MSCI had earlier in the year, and, while it is not a foregone conclusion, the signs are good that the UAE (and maybe Qatar) will make it into the EM league in a few months.

But there is one item within the influence of the UAE's decision makers that would make all the difference, both to clinch EM status with MSCI and inject fresh life into the local markets: the unification of the UAE exchanges.

This has been a subject of debate and speculation for at least five years. It has never been satisfactorily explained why a country the size of the UAE should have three financial markets. A unified market would have momentum and focus, it has been persuasively argued.

There are practical obstacles, and issues to resolve, before the markets can be made one. Regulatory issues have to be settled to answer the question of which of three bodies - the Dubai Financial Services Authority, the federal Securities and Commodities Authority and the Central Bank - should be in charge.

There is also the taxing question of where the main market should be located: in the existing financial infrastructure of Dubai, or the state-of-the-art facilities being prepared in Abu Dhabi.

But these are not insurmountable problems, and vested interests should no longer be allowed to stand in the way of the UAE's development as a financial market. The US investment bank Goldman Sachs has already prepared a master plan to merge the three entities, and this should be dusted off and implemented.

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The specs: 2019 GMC Yukon Denali

Price, base: Dh306,500
Engine: 6.2-litre V8
Transmission: 10-speed automatic
Power: 420hp @ 5,600rpm
Torque: 621Nm @ 4,100rpm​​​​​​​
​​​​​​​Fuel economy, combined: 12.9L / 100km

Our family matters legal consultant

Name: Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

Biog

Age: 50

Known as the UAE’s strongest man

Favourite dish: “Everything and sea food”

Hobbies: Drawing, basketball and poetry

Favourite car: Any classic car

Favourite superhero: The Hulk original

Abu Dhabi World Pro 2019 remaining schedule:

Wednesday April 24: Abu Dhabi World Professional Jiu-Jitsu Championship, 11am-6pm

Thursday April 25:  Abu Dhabi World Professional Jiu-Jitsu Championship, 11am-5pm

Friday April 26: Finals, 3-6pm

Saturday April 27: Awards ceremony, 4pm and 8pm

If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.

When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.

How to get there: Emirates currently flies from Dubai to Orlando five times a week.