By James Bennett
Gold firms list on the DIFX to seek exposure to emerging markets, says James Bennett.
What is it they say about buses? Well the same can now be said to be true of the Dubai International Financial Centre (DIFX) with two Australian companies announcing they are to list. On top of that, one of them, Monarch Gold and its executive chairman Michael Kiernan, has hinted that if things go smoothly he might even bring two more of his businesses to the exchange bringing the potential total from eight to 12.
So why are we seeing an Aussie influx all of a sudden and why Dubai of all places? To start off with Boulder Steel and Monarch Gold are quite evidently involved in commodities - a sector that has seen unprecedented growth and sky-high price hikes thanks to China's insatiable appetite for steel, iron, copper and gold. To keep up and even overtake its current GDP of 9% it is taking as much material as it can from natural resource-rich Australia. The boys down under aren't complaining, happily selling millions of tonnes of the stuff and making enormous profits along the way.
The trouble is, as with any booming business sector, that demand is far outstripping supply, But what Boulder and Monarch are cleverly doing on the DIFX is not initially seeking to raise additional revenue. If all goes well they can do that at a later stage, or on their own ASX back home or even the costly but well established and highly regarded AIM in London. Instead, they are looking firmly towards the future seeking to expose as many ‘emerging markets', such as the Gulf, to as much investment and interest in commodities as possible.
The DIFX, however, isn't complaining. If Monarch's proposed June application and the two other company listings it has in the pipeline pay off, it would at least inject some sort of life into a relatively static, untested and immature exchange.
Despite Monarch and Boulder being unfamiliar commodities players taking advantage of an estimated 10-year boom, this is an encouraging sign for the very young exchange that has being attacked in the past for not attracting enough homegrown and international names. What we must realise is that these are still foreign companies showing a keen interest in a strategic placing, rightly linking them to the Far East and India, whose appetite for gold and ties to Dubai will never fade. They are also far from small. Kiernan's fourth business, Consolidated Minerals, of which he is stepping down at the end of next month, is worth close to US$600m. He also has serious ambitions to have approximately 15% to 20% of Monarch's shareholders based in the UAE.
If the fledgling DIFX is to be known as purely a short-term commodities play and Dubai the ‘city of gold', then why not? We all know deep down that it takes decades to build a successful exchange, but at least it is slowly but surely attracting attention from foreign investors and growing in confidence everyday. Let's give it a bit more of a chance.
Now all we're waiting for is DP World and possibly even next week's latest arrivals to the emirate and perhaps even the DIFC, Halliburton, to symbolically list on the exchange drawing in further interest from home and abroad.