‘Consolidation crucial’ argues LSE markets chief

Warning: According to the LSE's Martin Graham the region's markets must now consolidate to survive.

A leading figure at the London Stock Exchange (LSE) has warned that the region's markets must consolidate and collaborate if they are to "create viable capital markets" and succeed on the international stage.

"There has been a lot of progress made, but in order to really be successful, there needs to be more cooperation between the different local markets," Martin Graham, director of markets at the LSE, told Arabian Business. "I think people have realised this, but just haven't acted on it."

Speaking at the World Exchange Congress in Dubai, Graham insisted that political differences might be hampering the region's bid to establish itself as a leading financial centre.

"From the outside it appears that everyone wants to have their own exchange, whereas it makes more sense to do something on a wider Gulf-type basis," he continued. "If you could create a regional Gulf market, it would be a very, very strong market. But we're talking politics here, aren't we?

"I would doubt whether a lot of these local exchanges can ever be successful in their own right," he added. "They can do okay - they can be good retail markets - but if you want to create viable capital markets you do need more consolidation, or certainly cooperation and collaboration between the different exchanges."

Graham also expressed concerns that high-profile markets such as the Dubai International Financial Exchange (DIFX) might suffer in the long term due to a regional over-saturation of competing markets.

"DIFX has been quite successful to date in terms of having the right technology and regulatory framework, but they've only had a very limited number of companies," he said. "Exchanges are about the scale, so if you have a series of very, very small markets, you're never going to get adequate scale to be successful and to attract investors."

Furthermore, Graham emphasised that the DIFX's strong regulatory framework had yet to be replicated widely across the region.

"If you look at some of the domestic markets, which are very much retail markets, there are some issues about corporate governance," he said.

"The DIFX has got high international standards, but some of the more domestic markets do need to continue to improve their corporate governance. They've made some significant strides but they need to go a lot further otherwise they're not going to attract the kind of institutional investors you need," he added.

"If you want to have a strong economy, you need strong capital markets," he continued. "You'll never have a proper economy without proper capital markets, so ultimately people will do what's right, won't they?"

Meanwhile, DIFX chairman Henry Azzam has revealed that the exchange is waiting for markets in the region to stabilise, and for the country's government to push ahead with asset sales, before it expects to attract the listings it has so far failed to deliver.

"It all depends on how fast the government will move forward in its privatisation strategy," he told the Middle East Investment Summit in Dubai.

"It has taken the government longer than expected to bring jewels like Emirates airline and Dubai Ports World to the market."

The DIFX has so far attracted only 20 members and eight listings since its launch in 2005, although Dubai Ports World, which bought British ports operator P&O last year for US$6.8bn, said in November 2005 that it would list shares within two years.

The exchange has two initial public offerings on the horizon with at least one by the end of 2007, Azzam added. The DIFX chairman refused to disclose any further details on the nature of the potential offerings.

Print | Email | Discuss this article |

USER COMMENTS (0 COMMENTS)

POST A COMMENT

CLICK HERE TO POST A COMMENT

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.