ADX chief backs tie-up with Dubai bourse

The head of the Abu Dhabi stock exchange says he favours a merger with the Dubai Financial Market, but there are official and commercial considerations to navigate.

The floor of the Abu Dhabi Securities Exchange. ADX is in talks to merge with the Dubai Financial Market.

The acting head of the Abu Dhabi stock exchange says he favours a merger with the Dubai bourse, but there are official and commercial considerations to navigate. Rashed al Baloushi, the acting chief executive of the Abu Dhabi Securities Exchange (ADX), said in an interview that talks about consolidating with the Dubai Financial Market (DFM) were "not a rumour".

"The exchange has to be big enough to reflect the real economy of the country. I very much wish to see the exchanges come together. I support it very much," he said. Mr al Baloushi stressed that he did not know the status of the talks because they were being held on the governmental, rather than operational, level. A source close to the situation said Abu Dhabi and Dubai officials would need to agree on issues including where the bourse would locate its headquarters, who would be chairman and how its board would be chosen. Also complicating matters was the fact that DFM was publicly traded, while the ADX was owned by the Abu Dhabi Government, the source added.

The comments provided confirmation of what has been widely discussed since Essa Kazim, the chairman of the DFM, first mentioned last month the possibility of a merger. But he later backed off those remarks. When contacted yesterday, DFM officials referred to a statement the bourse sent to the Emirates Securities and Commodities Authority this month, in which it said it "had no information or clarity about this subject" and was unable to confirm or deny merger talks. Mr Kazim declined to comment yesterday.

Three exchanges operate in the country. In December, Borse Dubai, the majority owner of DFM and NASDAQ Dubai, agreed to buy NASDAQ OMX's stake in NASDAQ Dubai. Regulatory approval for that merger is pending, but the two continue to operate independently. A final merger, eventually leading to a unified UAE bourse, has been touted by analysts as a potential catalyst for foreign investment. "If they do merge, there are synergies to be had and it is good for both the markets. It just lifts the investment profile of the UAE as a country," said Nour al Zoubi, the general manager of MAC Sharaf Securities in Dubai.

In recent weeks, the ADX and DFM have experienced low trading volumes due to a combination of uncertainty about Dubai World's debt restructuring and the European debt crisis. Mr al Baloushi is the acting head of the ADX after the departure last month of the former chief executive Tom Healy. The board was likely to discuss for the first time the process of hiring a new chief executive at its meeting on Sunday, Mr al Baloushi said.

ADX is taking several steps to increase foreign investment, including a roadshow to China this month, he said. As part of a larger delegation from the UAE, Mr al Baloushi plans to meet Chinese officials from mutual funds and other institutions that could put money to work in the region. "The purpose is to meet investors who are interested in the UAE, to present the ADX, its opportunities and how they can access our markets," he said.

The bourse is also looking to introduce products to bring in new foreign money. It introduced the UAE's first equity exchange-traded fund (ETF) two months ago and is looking to launch an Islamic equity ETF soon, said Elie Ghanem, the bourse's head of market and product development. Local investors have accounted for 91 per cent of trading activity in the ETF, although the bourse said it had seen strong interest from Japanese investors.

* with additional reporting by Sarmad Khan [e-mail] [e-mail]