Ports IPO set to boost DIFX

Port operator DP World's share sale could breathe life into the Dubai International Financial Exchange, a bourse that barely attracted investor interest after a 2005 launch trumpeted as the birth of the Arab Hong Kong.

State-owned DP World will become the first company to list shares exclusively on the exchange, which will be rebranded Nasdaq DIFX after US bourse Nasdaq Stock Market buys a 33% stake under a deal announced last month.

The world's fourth-biggest global container port handler said yesterday it would sell a 20% stake in what could be the Middle East's largest IPO.

"This listing is the last bit of the puzzle that has been missing for the DIFX," said Zahed Chowdhury, head of research at Deutsche Bank in Dubai.

Dubai, part of the United Arab Emirates, set up the DIFX to encourage foreign companies to raise capital in the world biggest oil-exporting region.

It is the centrepiece of a financial services hub that Dubai is building to capture some of the windfall from the region's economic growth, driven by a quadrupling of oil prices since 2002.

DIFX lies in the Dubai International Financial Centre, a dollar-based business park with its own laws and courts, that has attracted banks such as Goldman Sachs Group, Morgan Stanley, and Standard Chartered Plc.

Dubai officials said they want the DIFX to ride India's economic boom in much the same way as rise of China transformed Hong Kong from a key Asian financial hub into a global centre.

The exchange, straddling the gap in trading hours between Asia and Europe, would be a Hong Kong of Arabia, according to promotional material at the time of launch.

"The DIFX has the investors, it has the rules and regulations. The only thing that has been absent is financial instruments with significant liquidity to trade," Chowdhury said.

The DIFX, the region's only exchange to allow unrestricted foreign investment, started operations just before the Gulf stock markets crashed in 2006, scuppering its initial plans to list shares from as many as 15 IPOs that year.

Dubai-based Oger Telecom cancelled a $1.25 billion IPO last November on fears that tumbling Gulf markets would hit the share price after listing on the DIFX.

"The DP World IPO could kickstart the primary market," said Haissam Arabi, managing director of asset management at Shuaa Capital.

The DIFX now lists 11 companies, including two that have completed IPOs - Kingdom Hotel Investments and Islamic lender Albaraka Turk. All have shares listed elsewhere and the DIFX stocks barely trade.

"DP World will bring that liquidity to the market," said Hamood Abdulla al-Yasi, general manager at Dubai-based Emirates International Securities. "The IPO will mean a 180-degree turn in the fortunes of the DIFX," Yasi said.

The DIFX already offers the region's only structured products platform and over $10 billion worth of bonds that comply with Islamic law, more than any other exchange in the world.

The DIFX, with the help of Merrill Lynch & Co, Deutsche Bank and Morgan Stanley, started a market in structured notes in August to attract individual investors.

Nasdaq and DIFX parent company Borse Dubai, run by former OMX Chief Executive Per Larsson, agreed last month to take over Nordic and Baltic share markets owner and technology company OMX AB in a $4.9 billion deal.

Under the deal, Nasdaq plans to invest $50 million and allow Dubai to use its name in the Middle East, North Africa and South Asia, Borse Dubai Chairman Essa Kazim told Reuters last month.

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