An open market, with free and fair competition, should produce keener prices, better products and less wastage. That concept seems easy enough to grasp when applied to, say, a fruit market (‘don’t buy those apples, these are fresher and cheaper’), it also works for financial markets.
Changes to new the UAE’s Companies Law, allowing family businesses to go to IPO floating just 30-50 per cent of shares, are expected shortly. The idea is to encourage more family business to market and provide more investment opportunities for the excess cash sloshing around the region. It is fair to say the changes wouldn’t have come about without some form of competition between Abu Dhabi and Dubai. Both markets want the business, both want to push through product innovation to tempt more people in.
As IPO activity in the US and Europe slows down there is a temptation to think the cash-rich Gulf can pootle along at its own pace. Not so. Now is the time to push on. So it is good to hear these changes are imminent, and that Abu Dhabi Securities Market has entered into MoUs with Karachi and Lahore stock exchanges and others to allow cross-listing and share trading, helping foreign companies to raise capital.
Far from competing for business, rival stock markets can increase the size of the total market, says Tom Healy, director-general of ADSM. He says a secondary market or a separate counter for Small and Medium Enterprises (SMEs) or companies with little paid-up capital, where they could raise capital to meet their expansion requirements, is also needed.
“One stock market would be a bad idea, as it would eliminate the competition, which is the essence of every business.”
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