Hamed Ali, CEO, Nasdaq Dubai: Interview

Interview: Hamed Ali

How do you envisage the recent issuance of Industrial and Commercial Bank of China bonds on Nasdaq Dubai broadening the debt market?

HAMED ALI: This region generally prefers debt over equity, so we should be seeing more interesting debt issuances from the region outside of the UAE. We have done very well in the debt market, especially in the sukuk (Islamic bonds) segment.

Today, around 90% of globally listed sukuks are listed on Nasdaq Dubai, with a total value of around $58bn. So far in 2018 we have seen some $11bn in sukuk issuances and we believe we will continue to see more listings issued towards the end of the year, both in terms of corporate and sovereign issuances. To what extent can cooperation between Nasdaq Dubai and specialised government entities help to further boost the sukuk trading market?

ALI: In general, Dubai has done very well in terms of positioning itself as a global hub for sukuk trading. The next steps should be to diversify the portfolio of sharia-compliant products and to make Islamic financing accessible to different categories of investors, including institutional and retail investors.

How do you assess the obstacles that may be hindering more initial public offerings (IPOs) from taking place in the UAE and the region?

ALI: Governments have always led the way in developing the UAE’s capital markets. The state taking the lead is something that we see in many regional capital markets. Most state-owned businesses are tapping local financial markets with the aim of building up their capital structures, while also developing the local markets. In the UAE, family businesses play a major role in the economy and in many cases are still being handled by the founding generations. As time passes and succession becomes a more relevant issue, IPOs will become more relevant and common.

As a market, we need to put more focus on small and medium-sized enterprises (SMEs). To this end, we have reached a collaboration agreement with the Jebel Ali Free Zone Authority so that free zone companies are now able to list in the market. This type of collaboration will be extended to other free zones as we are keen on attracting SMEs into the market. This will create a virtuous cycle as more companies will attract more investors, which in turn will attract more companies, and so on. Other measures, such as allowing 100% foreign ownership of onshore companies, will have a significant impact on the market outlook as well.

What is the potential for real estate investment trusts (REITs) in the local market?

ALI: One thing that we are going to start seeing in the next few years, first in the UAE and then in the region, is the growth of REITs as an increasingly mainstream product. The main reason for this is that the region is relatively young with new infrastructure that has most of its income-generating years ahead.

Allowing investors from all categories to have a piece of this pie is extremely important. Profit-sharing agreements will make REITs more attractive to investors than directly financing real estate businesses, as they imply a greater distribution of risk as well as lower entry and exit barriers.

What impact has the launch of the futures market in Dubai had, and how do you view its growth prospects in the coming years?

ALI: The launch of the futures market in Dubai has been very successful as it has allowed investors to benefit from both a speculative perspective and a hedging point of view. Due to its role in increasing the efficiency of the market and the important opportunities it presents, the futures market is expected to be one of the main growth areas in the coming years.