Trading volumes on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) are at an all-time low. Companies' valuations are suffering. Stock brokerage houses are wringing their metaphorical hands. Aabar has decided to go private. Initial public offerings (IPOs) expected to return this year are yet to occur: the announced IPO of Axiom Telecom is a major test. If we wait longer, there will be no one around to celebrate if the rumoured merger between the ADX and the DFM/NASDAQ-Dubai comes off.
Is the problem restricted to the UAE and the Middle East? It appears so. Western markets are doing fine, while Hong Kong is booming and attracting new issuers every other week. Singapore has captured numerous pools of liquidity during the financial crisis; pools that were no longer comfortable in tax havens or old Europe or those that are being created in Asia, South America and in the Middle East. Unfortunately, the Gulf states are attracting only a small portion of this flow and when they do capture some of it, it is reinvested somewhere else.
The problem is, however, common to the MENA region at large and for both private and publicly listed companies. Over the past three years, investors' profiles have changed. Large investors (family offices, institutions or fund managers) have in general a shorter investment time horizon than before but, more importantly, need the ability to arbitrage their positions on a regular basis. This is also true for investors in private companies or private equity who are looking at a two to three-year exit horizon rather than five to seven years previously.
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