UAE stock markets hit $1 trillion for the first time boosted by IPOs

Listings momentum will continue next year amid expansion of country's economy, analysts say

The Dubai Financial Market. The bourse has recorded several listings in the last two years. Chris Whiteoak / The National

UAE stock markets have hit $1 trillion in market capitalisation, primarily driven by initial public offerings as well as strong earnings, as the Arab world’s second-largest economy continues to grow amid diversification efforts.

The total market capitalisation of the two bourses that make the UAE market is bigger than Milan or Madrid, according to data compiled by Bloomberg. While dwarfed by the nearly $3 trillion Saudi Arabian Tadawul stock market, the UAE is larger than most emerging markets, barring a few like India and China, the data shows.

“The combined value of the UAE's stock markets has reached the significant milestone, with the Abu Dhabi Securities Exchange (ADX) contributing $801 billion and the Dubai Financial Market (DFM) adding $206 billion to this achievement,” George Pavel, general manager at brokerage firm Naga.com Middle East, said. “This growth has been driven by successful IPO activities, increased foreign investment inflows, and notably, strong corporate earnings across key sectors.”

There has been a flurry of listings in Dubai and Abu Dhabi in the last two years on the back of a push from the government to boost liquidity as well as growing investor demand. There are currently 100 firms listed on the ADX, while on DFM it is 68, according to data provided by the two bourses on Monday.

This month, Delivery Hero, the Germany-based food delivery platform, said it plans to list 15 per cent of its UAE subsidiary Talabat on the Dubai bourse in the fourth quarter to capitalise on the listing boom in the Emirates.

Its intention to list follows UAE retail major Lulu Group's successful IPO this month to raise Dh6.32 billion, the country's largest listing so far this year. The hypermarket chain operator priced its shares at the top of the indicated range amid strong investor demand.

Some of the other companies that listed in the UAE this year include ADNH Catering, a unit of Abu Dhabi National Hotels, which raised Dh864 million through the sale of a 40 per cent stake; NMDC Energy, a unit of Abu Dhabi contractor National Marine Dredging Company, which began trading on the ADX in September after raising $877 million; and Alef Education that raised $515 million from its IPO in Abu Dhabi in June.

“The UAE was at the forefront of all IPO activity in the GCC region in third quarter of 2024, raising a substantial $1.1 billion in IPO proceeds,” Vijay Valecha, chief investment officer at Century Financial, said. “As a result, the UAE accounted for 69 per cent of the total IPO capital raised in the GCC during the quarter. Saudi Arabia came in second place, raising $512 million, accounting for 31 per cent of the region’s total.”

The listing momentum is expected to continue next year with potential offerings from Etihad Airways and Alpha Data. "From airlines and retailers to food delivery companies and IT services firms – listings can be expected across the board spanning numerous sectors,” Mr Valecha said.

The strong performance of the UAE's economy amid the expansion of its non-oil sectors is also boosting stock markets. In September, the UAE Central Bank revised its 2024 gross domestic product growth forecast to 4 per cent from the previous estimate of 3.9 per cent in June.

In the first quarter, the country's economy expanded by 3.4 per cent, with real GDP reaching Dh430 billion, the Ministry of Economy said. The non-oil sector expanded by 4 per cent year on year during the quarter.

“The UAE's robust economic fundamentals underpin the positive outlook for its stock markets,” said Mr Pavel. “This strong macroeconomic backdrop, combined with a promising pipeline of new listings and continuous market reforms, positions both ADX and DFM for sustained growth."

The growing technology sector, which has been receiving a surge in investments, is also supporting the economy and the stock markets. Earlier this year, Microsoft announced a $1.5 billion investment in Abu Dhabi artificial intelligence and cloud company G42 to help it boost G42's global expansion plans. The Abu Dhabi-based technology company MGX, BlackRock, Microsoft and Global Infrastructure Partners have also launched an AI infrastructure investment partnership that aims to mobilise up to $100 billion to enhance the future of AI.

Local bourses have also recorded activity from the sector. Abu Dhabi-based blockchain and crypto solutions company Phoenix Group began trading on the ADX in December following a $370 million IPO. In October, Space42, the UAE-based AI-powered SpaceTech company created following the merger of Bayanat and Yahsat, made its trading debut on the ADX.

Overall, Emirates NBD, Emaar Properties, Emaar Development, Dubai Electricity and Water Authority are some of the biggest stocks on DFM, while for Abu Dhabi it is International Holding Company, First Abu Dhabi Bank, e&, Multiply, Alpha Dhabi and Aldar Properties.

"Dubai has been a star outperformer with many stocks including recently listed ones such as Dubai Taxi Company, Salik and Parkin making new highs," said Nishit Lakhotia, head of research at Manama based Sico.

"DFM is a major outperformer to all other GCC stock exchanges, including Tadawul. The outperformance is backed by strong macro drivers, company financial performance and future outlook. The momentum in the Emirates looks sustainable and can spill over to next year."