Dubai and Qatar locked horns this week for a slice of the global stock exchange industry, looking to use record oil and gas income to grow their finance empires.
In a bold move, state-owned Borse Dubai agreed with U.S. stock market company Nasdaq that the family ruled emirate goes ahead with its takeover bid for Nordic bourse operator, and then sell it to Nasdaq in return for a 20 percent stake in the combined group.
Borse Dubai, which combines the Dubai government's holdings in the Dubai Financial Market and the Dubai International Financial Exchange, had earlier trumped an agreed Nasdaq deal for OMX with a $4 billion takeover offer.
But as soon as Nasdaq and Dubai announced their agreement, Qatar, which had before expressed no interest in OMX, started buying shares in the Stockholm-based exchange. By 1450 GMT, it had secured a near 10 percent stake.
It also said it bought 20 percent of the London Stock Exchange, challenging the agreement between Dubai and Nasdaq that would give the Dubai 28 percent of the LSE and leave Nasdaq with 3.5 percent. Nasdaq owns 31.5 percent of the London bourse.
"It's pretty direct competition," said Steve Brice, Middle East economist at Standard Chartered Plc in Dubai. "There is a familiarity to this where Gulf states are doing pretty similar things; investing in financial services and tourism."
Saudi Arabia, the United Arab Emirates and the four other Gulf Arab oil producers have reaped a windfall in oil revenue from record prices. Oil has traded above $80 per barrel for the last week.
Qatar, a family ruled nation of less than 1 million people, has also capitalised on its natural gas reserves to become the world's largest exporter of liquefied natural gas. It is the richest Arab country on a per capita basis.
Dubai has used its property, tourism and transport industries to attract billions of dollars of investment, recycling the profit into stakes in Standard Chartered Plc, Deutsche Bank AG, and other financial institutions and global companies. Last year, it paid $6.8 billion for port operator P&O.
The P&O purchase raised a political storm in the United States on concern that ownership by an Arab government of U.S. port terminals would jeopardise security. Dubai eventually sold the U.S. operations of P&O.
Dubai's agreement with Nasdaq risks prompting similar issues.
"This deal will raise serious questions that will need to be answered," said U.S. Senator Charles Schumer, who opposed Dubai's takeover of P&O port operations.
Gulf states have rarely come into such direct competition for a global asset. Dubai and Qatar have previously cooperated on investments.
The state-controlled Qatar Investment Authority, which bought the LSE and OMX states, is an investor with Dubai in the Global Strategic Equities Fund, which purchased a stake in HSBC and Airbus parent company EADS in May and June.
Still, Qatar has followed Dubai's lead in spending billions of dollars on its airline and airport facilities, looking to rival Dubai-based Emirates that has grown in 22 years to become the world's seventh-largest international carrier.
Qatar has also developed a financial authority that, like the Dubai International Financial Centre (DIFC) set up in 2004, operates according to international regulatory standards.
The Dubai International Financial Exchange, in which Nasdaq will take a 33 percent stake, is a part of the DIFC.Dubai will use the re-named Nasdaq DIFX to expand in the Middle East, North Africa and Asia, Borse Dubai Chairman Essa Kazim said on Thursday. (Reuters)
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