Marketing the market

by This email address is being protected from spam bots, you need Javascript enabled to view it on Sunday, 03 June 2007

Global reach: The DFM, under Essa Kazim has grand plans to attract more big-name institutions to its ever-growing exchange.

As the he Dubai Financial Market (DFM) evolves into a sophisticated, mature exchange, improvements in corporate governance and the attraction of foreign investment have both been cited as part of the learning process.

However, perhaps the most important development that could cement the sustainability and long-term growth of the market, is the influx of institutional investors to the fledgling bourse.

Historically, international investors have been held back by a lack of exposure to the region. Emerging markets used to mean Latin America, Eastern Europe and Asia ex-Japan. The Middle East rarely came into the equation.

In fact, such are the benefits of welcoming institutions to get involved in the market, the DFM's backroom staff have embarked on an international recruitment expedition. Last week over 230 London-based institutional investors and fund managers held 215 meetings with senior representatives of DFM-listed companies at the DFM's international investor conference in the English capital.

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The extensive list of high-profile institutions and funds that took part included Citigroup, Deutsche bank, Morgan Stanley and Merrill Lynch. While hosting a conference to lobby potential investors is not exactly groundbreaking, however, it could just be the beginning for the DFM, which is increasingly focused on snaring international institutions and the many advantages they bring to a market that is still finding its feet. Such was the success of the conference, Essa Kazim, chairman of the DFM, admitted that he would likely be taking the Dubai bandwagon on the road to the US, other parts of the UK and the Far East in the next 12 months. So, as Ahmed Badr, financial analyst at HC Brokerage tells Arabian Business: "This is just the beginning in the drive for institutional investors. They'll have to go to the US of course, but the UK is just the beginning."

Highlighting the need to attract more strategic investors to the DFM to bring "increased stability", Saad Abdul Razak, CEO of Dubai Islamic Bank was one of the main lobbyists at the conference. Other senior members of the DFM community in attendance were Adel Ali, CEO of the bourse's youngest member, Air Arabia, and Arif Amiri, director of investor relations, corporate governance and business development at Emaar Properties, who stated that the DFM roadshow would play a major role in building "Dubai's global standing as an ideal destination for overseas investment". Commenting on the outcome of the conference, Kazim spoke of the DFM's "proactive initiative" to encourage investment companies and fund managers to get involved in the market.

He added that the conference demonstrated "the DFM's vision to support listed companies and create a new segment of strategic investors as per the market's long-term strategy".

Other DFM-listed companies that made the journey to London included Shuaa Capital, Dubai Investments, Arabtec Holding, du, Aramex, Salam International Investments, National Central Cooling and Union Properties. Also well represented at the conference was Tamweel. According to Adel Al Shirawi, CEO of the UAE-based finance company, attracting institutional investment into the DFM is crucial to its ongoing evolution. "It's important to change the mix of existing investors and equity holders from speculative to institutional players who tend to go for strategic allocations and hence tend to stay longer with the stock and reduce volatility," he tells Arabian Business.

"Another advantage is that these institutions bring more in-depth analysis into play in the market rather than rumours - they will issue shares on technical and fundamental grounds instead of just hearsay," he adds.

Fahd Iqbal, senior analyst and strategist at EFG-Hermes, believes that with the reduction in volatility that institutional investors could help bring to the DFM, there will also be improvements in its pricing mechanism.

"Institutional investors would help bring some much needed stability to the markets, by virtue of their longer-term view and more fundamentally-based analysis. This will gradually help improve pricing efficiency and attract more participants," he explains.

"There is also the argument that the larger average transaction size associated with institutional investors is good for revenues," he continues.

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