HSBC Holding said on Sunday it is setting up a brokerage company that will trade on the Abu Dhabi Securities Market (ADSM) and Dubai Financial Market (DFM) to give its clients access to the stock markets in the UAE.
The company, to be called HSBC Middle East Securities, will offer UAE domestic market brokerage services to both institutional and retail investors.
It is expected to begin trading for institutions by the end of 2007, and to offer retail brokerage services in the UAE – the second-largest Arab economy – in 2008.
“There is a common theme where the Middle East is increasingly valuable and important to people,” said Neil Foster, chairman of HSBC Middle East Securities.
Dubai and Abu Dhabi markets are trying to attract foreign investment after last year’s crash saw four of the seven benchmarks drop more than 35%, sending valuations plummeting and shaking investor confidence.
The main stock indexes of Saudi Arabia, Dubai and Abu Dhabi were the three worst performers among 82 tracked last year by US stock market research Birinyi Associates.
Kuwait has led a recovery this year, rising 28%. Oman rose to a fresh record close on Thursday and Qatar to a 14-month high.
“The fundamentals of the region are very positive,” Foster said.
Gulf Arab governments are easing curbs on foreign capital, hoping more institutional investment will help reduce volatility in the bourses, which are dominated by retail investors.
Saudi Arabia last week lifted all remaining restrictions on Gulf Arab investors in its publicly listed stocks, allowing them to trade in financial services, including banks.
Rashed al-Baloushi, acting general manager of the Abu Dhabi Securities Market until this month, told Reuters in June that several foreign banks, including HSBC, were seeking brokerage licences in the UAE.
Still, international investors are generally restricted in the percentage stakes they can own in companies.
HSBC already buys and sells UAE shares on behalf of Western institutions through third party brokers. In addition, HSBC is a sub-custodian on both ADSM and DFM, and the bank will continue to provide this service through a specialist sub-custody operation.
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