Arab firms eye dual listings as local bourses tumble

Dual listing offers access to foreign investors, sidesteps local bourse losses, say analysts
Arab firms eye dual listings as local bourses tumble
Foreign investors comprise around a fifth of those on Gulf bourses, many of which have suffered from low liquidity and declining turnove
By Shane McGinley
Thu 10 Mar 2011 03:02 PM

Arab companies may opt to list in London in a bid to attract
foreign investors and sidestep the losses on local markets caused by the region’s
ongoing turmoil, analysts have said.

Foreign investors comprise around a fifth of those on Gulf bourses,
many of which have suffered from low liquidity and declining turnover. The UAE’s
three exchanges have seen one initial public offering in two years.

“People will choose London to try and attract international
stock. Listing in London it will be easier to invest in the stock and then the
hope is that more people will invest,” said Nicholas Wright, head of
institutional brokerage at Mubasher Financial Services.

Dubai holds a 20 percent stake in the London Stock Exchange.

Dual listings are likely to look more appealing following
the heavy losses sustained by bourses in the Arab world. Some $140bn has been
wiped off the MENA region’s 16 biggest stock exchanges in five weeks, as
political turmoil continues to affect economies.

The uprisings may also spark a surge in depository receipts –
a financial security that allows the shares of a foreign company to be traded
on major stock markets around the world.

 DRs enabled Egyptian
companies to trade overseas while the Egyptian bourse was closed during the
demonstrations that led up to the ousting of president Hosni Mubarak

“Egypt is a classic example… their [DR] programs continued
to trade - very actively - throughout the recent crisis, and performed well,”
said Peter Gotke, vice president of The Bank of New York Mellon in Dubai. “So
yes, there is an appetite now for companies to use DRs to raise capital, drive
liquidity, raise visibility [and] diversify shareholders.”

This sentiment was echoed by Youssef Saada, head of
financial research at Zawya in Beirut, who said double listing on overseas
stock markets was “good not only in times of crises.”

But dual-listed companies will still struggle to negate the
impact of local uprisings on their stock price, said Wright.

 “Companies list to
raise capital and people are buying into the potential for the company on
future earnings… [but] if the Middle East is suffering you carry the risk with
you,” he said.

Oman’s Renaissance Services earlier this month listed its
Dubai-based oilfield services unit in London in a bid to raise about $500m in
capital.

 “Renaissance now
believes a listing of Topaz on the London Stock Exchange offers the most
effective way to optimise future growth opportunities and increase shareholder
value," company chairman Samir Fancy said.

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