Thinking outside the box

The Gulf region has been reeling from the impact of the Arab Spring protests and this volatility has been reflected on stock markets across the peninsula. The total volume of trading across the Gulf Cooperation Council (GCC) tumbled 21 percent to 133.8 billion shares last year. At the same time, the value of shares raised through company listings fell even further and was down a massive 55 percent.

The sluggish trading environment has led some analysts to speculate that now might be time for the regional bourses to consider merging and creating one large Gulf-wide entity. One man who has had plenty of experience in cross-border mergers is Andre Went, the CEO of Qatar Exchange (QE).

Before taking up his position in Doha three years ago he worked for NYSE Euronext — QE’s partner — for 20 years and was involved in helping to integrate the European Union’s national bourses.

So does he subscribe to the thinking that the GCC bourses should move closer together? “Ultimately and potentially yes,” Went begins. “I’ve been asked this before and one of my activities with NYSE Euronext [QE’s partner] was to work on the European integration… so I have seen many angles and many ways to start.”

Prior to 2011, talks over a central bank and a common currency appeared to fall off the main radar, but the GCC is now showing signs that it is interested in closer financial links, most evident in the recent establishing of a committee to manage the setting up of a customs union. While closer consolidation is a product of the Arab Spring movement, Went says further formal links for the six regional bourses are still a long way down the current agenda.

“For the time being, there are more important priorities and I think markets focus on their open development before they start looking at cross-border combinations.

“It is more important to start harmonising regulation rather than harmonising trading... The key thing for exchange consolidation is regulation, the regulators need to provide cross border access.

“As long as you are restricted to your own country it doesn’t make sense for exchanges to consolidate,” he adds.

“The true facilitator starts with market demand; there must be demand from investors to look at the region in an integrated way,” Went believes. “Then the regulators should start facilitating that… Basic things like harmonising trading days and trading hours. All of those things will help presenting a region as one entity to the investors.”

Therefore, the real question is whether there is sufficient investor appetite in place for such a move to be worth considering? “The investors would like to see the region as a GCC region but there is still too much differentiation. There is no easy access for foreign investors at all.”

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