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Wed 15 Oct 2008 05:27 PM

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ADX may act to curb 'hot money'

Abu Dhabi bourse will take measures if short term stock market plays causes market instability.

The Abu Dhabi Securities Exchange (ADX) may act to curb foreign "hot money" - short term stock market plays - if it causes market instability, the bourse's deputy chief executive said on Wednesday.

"We as a market have been able to attract foreign investment, which is needed because we are trying to encourage liquidity," Rashed Al-Baloushi told reporters. "But if we have a problem with hot money from outside, we will fix it."

Foreign holdings in ADX amount to about 10 percent but foreigners account for about 30 percent of total trading.

"It means it is hot money, not long-term and can leave any time which is bad for market stability," Ziad Al-Dabbas, advisor for Capital Markets at National Bank of Abu Dhabi (NBAD), told a brokerages forum.

"In markets such as Abu Dhabi and Dubai, although foreign holdings are low, they account for high trading volumes which is dangerous," he said.

Al-Dabbas said the regulator can act by bringing down the minimum percentage of holdings for foreigners.

"But, at the same time, this is an open market and foreign investments are needed for liquidity and depth," he added. (Reuters)