What are your expectations with respect to initial public offerings (IPOs) in the near future?
HAMED ALI: We expect to see an increase in the volume of all equity-related transactions, not just IPOs, in late 2017 to early 2018. Not only have a number of firms recently announced that they are considering going public, but there has also been more interest lately in other types of capital-boosting activities such as real estate investment trusts (REITs). Dubai’s real estate market has historically been an important sector and continues to grow at a considerable pace. The population is increasing, more business parks are appearing and developers are becoming much more innovative when it comes to designing large-scale working and living communities, all of which lends itself to the establishment of a vibrant REIT market. There are currently two publicly-traded REITs and a number of others in the works.
How can greater access to capital markets benefit small and medium-sized enterprises (SMEs)?
ALI: SMEs form an important part of the economy and are in need of capital to fuel their ambitions for growth. We are currently working with the regulator and other entities to develop a platform that will prepare SMEs for future capital-raising activities by combining concepts from crowdfunding projects around the globe with those of other SME-financing models, such as the Alternative Investment Market in London, to create a platform that will be uniquely suited to the types of SMEs found throughout the UAE and wider region. While in the initial phases of creating such a model, there have already been some very successful crowdfunding platforms developed within the market, and the Dubai Financial Services Authority has been a leader in formulating the legislation that supports them. Other measures have also been taken to lower the barrier of entry for SMEs, such as the reduction of minimum market capitalisation requirements from $50m to $5m, which should further enable growth.
To what extent are new products such as equity futures meeting the needs of the local market?
ALI: Traditionally, the market only offered very basic products with very little in the way of hedging mechanisms. The introduction of equity futures has changed this and paved the way for the development of other instruments. Not only is this good for investors, but it is also positive for companies. Investor relations departments, for example, are now able to find more sophisticated investors in other parts of the world. The exchange already hosts a significant amount of foreign capital, most notably from the US, Europe and the greater Middle East, but other regions, such as East Asia and sub-Saharan Africa, are also increasingly putting their money in this market. As such, we are developing new products that will meet the increasingly complex needs associated with such an influx of investors, like index futures paired with local exchange traded funds.
Moving forward, which countries do you anticipate as holding the greatest opportunities for listings?
ALI: Foreign companies understand that Dubai offers access to an increasingly active regional investor base with considerable liquidity. Given the emirate’s excellent connectivity, it is the perfect base from which multinationals can access regional growth markets.
In terms of other countries, Egypt shows significant potential, and there are numerous advanced, large companies in Egypt that could benefit from listing in Dubai. Indeed, certain eminent names, such as Orascom Construction, have already done so. Agreements with Egyptian capital markets authorities make the process relatively easy and quick, which is also helpful in attracting companies. Our goal is to extend this model to other countries in the region, removing roadblocks and facilitating listings in both the private and public sectors. The Tunisian government, for example, is working with us on a sukuk (Islamic bond) listing, whilst Kazakhstan has also shown considerable interest in collaboration.
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