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Thu 14 Dec 2017 09:58 AM

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London's Lord Mayor courts Gulf companies to list on LSE

Alderman Charles Bowman met with members of the UAE's finance community

London's Lord Mayor courts Gulf companies to list on LSE
Lord Mayor of the City of London Cooperation, Alderman Charles Bowman pictured with Arif Amiri, CEO of DIFC Authority.

Some of London's top ambassadors of commerce and trade were on a mission in the Gulf region this week: to pitch the country’s 6 trillion dollar stock exchange.

The visit by the Lord Mayor of the City of London Cooperation, Alderman Charles Bowman, saw him meet with the UAE's British Business Group, members of the country's finance community in Dubai and Abu Dhabi, as well as officials from the Abu Dhabi Stock Exchange (ADX), to discuss how companies listing at both local stock exchanges as well as the bourse in London could be a win-win for all.

“We’ve had really productive and constructive conversations. It’s a great opportunity for wonderful exchange, to be able to talk openly and widely about future collaboration,” Bowman told Arabian Business.

Part of the Lord Mayor’s responsibilities include advising the UK government on how to help the country’s financial sector to flourish.

Luring local companies to list on the London Stock Exchange (LSE) could prove to be a goldmine for the bourses fortunes, especially with uncertainty looming over whether it will emerge unscathed from a retraction of the trade terms that arguably made it favourable for the UK to remain in the EU.

“Brexit is expected to take away from Britain’s financial strength especially as a hub," said Issam Kassabieh a UAE-based ‎financial analyst at investment company ‎Menacorp FS.

“So they'll need to maintain that perception by still being able to attract listings and trade deals. Getting companies to list helps companies because they grow in trading value, and fees earned on services and transactions,” Kassabieh explained.

It helps that the LSE, the world’s most international stock exchange with 350 listed companies from over 50 countries, is performing above par at the moment; the group’s most recent quarterly earnings surged 17 percent to 1.66 billion pounds ($2.19 billion).

“Our stock exchange is in good health,” Bowman said on his visit. The exchange has completed its 70th IPO this year and “will get the number to over 100 by the end of the year, up from 65 last year,” he added.

However, a failed merger bid with Deutsche Boerse earlier this year hasn’t eased any of the vulnerability the LSE group’s CEO feels with regards to the exit from the EU; the exchange remains perched precariously enough for Xavier Rolet, a deep and vocal critic of Brexit, to announce he would step down from the bourse in 2019 and “not be returning to the office of CEO or director under any circumstances.”

Gulf listings

The LSE is pushing hard for a portion of oil giant Saudi Aramco’s initial public offering (IPO), expected to be the largest in history. The state-backed company has said the company will float its shares on the Riyadh exchange, Tadawul, and at least one major international stock market.

But the LSE would be content even if others, such as the Abu Dhabi National Oil Company (ADNOC), which went public on the Abu Dhabi Stock Exchange (ADX) earlier this month, chose the London bourse to have access to a wider pool of investors, according to LSE’s head of primary markets for the Middle East, Africa and India capital markets, Gokul Mani.

Companies from the Gulf that have dual-listed on the LSE previously have proven to be big winners in London, Mani, said in his pitch to the gathering in Abu Dhabi.

“NMC Health listed with a market cap of no more than $600-700m and today it stands at $7.5bn with inclusion in the FTSE 100,” Mani said.

“Al Noor, which is another local champion in the UAE, is now included in to the FTSE 100 under the name Mediclinic following merger and acquisition activity.

“We’ve seen some very successful domestic IPOs here. ADNOC listed on ADX 22 times over-subscribed, and these types of companies could benefit from a dual listing in London where issuers can access a deep pool of international liquidity.

“Perhaps for more institutional stores and more infrastructure focussed issuers, London Stock Exchange has a strong track record in securing premium valuations, again with the ability to compliment the local market,” he added.

Giants such as ADNOC and Emirates Global Aluminium, one of the world's biggest aluminium producers, expected to dual list in the UAE and overseas, stand to gain a lot from selling shares on larger global exchanges like New York and London, said Richard Oliver, executive director at Portsmouth Limited Investment Group.

“Emerging market bourses tend to be much more volatile. If from London you see the price of a company’s shares is going down in, say Abu Dhabi, but nothing has changed in the fundamentals of the company, then you buy in the local exchange, supporting the price in Abu Dhabi, and reducing price volatility,” he explained.

ADX’s chief executive, Rashed Al Blooshi, is eager to encourage companies to dual list.

“We in Abu Dhabi have a very clear objective to expand in terms of financial instruments, rules, regulations and governance,” he told Arabian Business.

“We have the potential now to look at the companies which are listed in London, and our objective now is to facilitate the dual listing process.”

The challenge will be putting together the legal framework, procedures and agreements to make dual listings as straight forward as possible.

“Shifting shares between the two exchanges has to be as efficient as possible,” Al Blooshi said.

However, intent will overcome obstacles, according to Blooshi. “I’m very sure that it will become easier, and that we will be able to get things off the ground.”