Taking stock of a common exchange

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What's all this talk about a common stock exchange?

It looks like the GCC will form a common stock exchange after establishing a common currency, according to the boss of Abu Dhabi Securities Market, Tom Healy.

Establishing a common currency would be some feat. When's this planned for?

Well it was planned for 2010. But it's not easy getting six independent states to agree to sharing the same currency. For a start, whose face do you put on the notes?

So what's happening with it?

The deadline was cast into doubt in 2006 when Oman indicated it would be unable to meet the required convergence criteria to participate.

Meanwhile, the initiative was dealt a further blow last year when Kuwait depegged its dinar from the dollar, blaming the falling US currency for driving up inflation.

So the 2010 deadline for a common currency was somewhat optimistic?

The common currency may not happen for some years after the official 2010 deadline. Most analysts believe it is now impossible to meet.

But if we do get a common currency, we'll also get a common stock exchange, right?

Healy said that the exchange would start "some years" after regional monetary union and the common capital currency.

And he should know, I guess.

Yes, but not everyone is so sure. It seems the issue of a common currency could be the biggest hurdle.

Nasser Saidi, chief economist at the Dubai International Financial Centre (DIFC), said last month that the proposed deadline for the common currency was "highly ambitious, largely because of the divergences in economic conditions within each of the six GCC countries".

But international investment interest in the GCC markets must lend impetus to establishing a common marketplace?

Yes. Fahd Iqbal, Gulf equities analyst for EFG-Hermes Holding SAE, said that managers still look at this region country by country, but in a couple of years they'll start looking at it by industry sector as they do in Europe.

Currently most countries in the region operate single country exchanges, such as the Doha Securities Market and the Saudi Stock Exchange (Tadawul), while the UAE operates two domestic exchanges and one international exchange.

But eventually Iqbal expects a Gulf market to occupy a broader sector space, resembling the pan-European exchange, Euronext NV.

Hmm. So I guess it's a case of 'watch this space'?

Yes, but don't hold your breath. It could be a long time before the exchange idea is on the table.

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