UAE a step nearer on secondary listings platform

ADX and DFM to launch separate screens for investors to trade shares currently bought and sold over the counter.

The UAE’s stock exchanges are moving a step closer to setting up a platform for secondary listings targeting as many as 135 private joint stock companies.

The Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) this year will launch separate screens for investors to trade shares currently bought and sold over the counter, according to the federal stock market regulator.

“We are targeting not only the local market, but regional and then the wider Middle East,” said Abdullah Al Turaifi, the chief executive at the Securities and Commodities Authority.

“We want our exchanges to become a platform for private joint stock companies on the national and regional levels.”

Brokers who traded shares of private companies such as Abu Dhabi Cooperative Society and Manazel Real Estate were jokingly referred as “Dr Briefcase” because they carried valuable documents needed to process the trades.

Several major companies are still traded outside the market, including Manazel, Al Qudra Holding, Noor Capital, The National Investor and RAK Petroleum. The supermarket chain Abu Dhabi Cooperative Society is arguably the most prominent company traded over the counter.

After the global financial crisis, many companies preferred to stay outside the market because they believed their valuations were much higher than what the bourses would offer, or because their shareholders want to keep control.

These companies are classified as private joint stock companies, which allows them to sell shares to individuals without going public.

But a surge in liquidity and equity values has encouraged five to six companies to prepare for initial public offerings this year valued at Dh8 billion, Majd Maaiteh, the head of securities at National Bank of Abu Dhabi, said in an interview on Monday.

The companies include a mix of retail, hospitality and healthcare offerings, he said.

The DFM and ADX were among the world’s best-performing stock exchanges last year and the rally has continued into 2014. Abu Dhabi shares are up 14 per cent this year, with Dubai’s measure 24 per cent higher.

“I think the market is ready,” Mr Al Turaifi said. “We have seen a lot of cash, and values of trades have increased tremendously. This is encouraging a lot of companies to list and we will be announcing them in due course once they have completed the required process and feasibility.”

Before the establishment of local stock exchanges, shares of private joint stock companies were regulated by the Central Bank, which licensed brokerages to trade shares.

Talk of installing an electronic screen for over-the-counter shares so that brokers could see real-time quotes, volumes and averages began in 2010.

The screen will bring greater transparency to those trades and allow for more frequent trading, brokers say.