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Waiting for the lift, Part II

October 30, 2008 9:17 by kippreport

Scott MacMillan

The proposed inclusion of Kuwait, UAE and Qatar in MSCI Barra’s influential Emerging Markets Index, a global reference for emerging markets, will add additional pressure to open more stocks to foreigners, says Bruce. Indeed, what some brokers are calling for is stipulation on the part of the regulator, or the stock exchanges themselves, that listed companies make a minimum percentage available to foreigners. “I think the stock exchanges need to address it,” says Bruce.

That’s not likely to happen soon. Rashed al-Baloushi, deputy CEO and director of operations at Abu Dhabi Securities Exchange (ADX), says the bourse is reluctant to change its listing requirements to include a minimum foreign ownership allotment. While such a move would indeed raise liquidity levels and help develop capital markets, the number of traded companies is still small compared to more developed markets, and the bourse fears that issuing any such a requirement may discourage companies from listing at all. “While ADX encourages all listed companies to open up to foreign investors, this issue remains a shareholders’ decision,” al-Baloushi says. “We have been actively encouraging those companies that do not allow foreigners to invest or those who have set a limit for foreign investment to amend their articles of association. ADX cannot force the companies to do so.”

Changing the 49 percent ownership cap “will lift a macro-barrier, but it will be up to the companies to increase the limits for foreigners, or even GCC nationals,” says Fadi al-Said, head of equities investment at ING Investment Management Middle East. “I don’t see it having a big impact on the markets in terms of actual figures, because I don’t think companies will give up majority control. Some of the companies [listed on local stock markets] know they can easily be acquired by a small company in the Far East.”

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Tags: foreign investment, ownership cap, UAE