A launch pad for EVERY IDEA
Investors have more reason than ever to make Dubai their launch pad for smart investments in the region.
How has Nasdaq Dubai expanded and diversified in recent months?
We have had a successful year on many fronts. Equities traded value increased by 38% compared on 2018, while on the fixed-income side, Dubai is now the largest regional venue for foreign currency debt listings. Our sukuk market continues to expand with over USD14 billion from 17 listings. Dubai is now home to USD64 billion in sukuk listings, which makes it one of the largest venues globally for that asset class. We have attracted 54% of that value from outside the country, while the UAE accounts for 46%, indicating a healthy national and international balance. We have also listed six conventional bonds during 2019. Leading banks from China are continuing to list their bonds with us, underlining our role as the go-to jurisdiction in the region for hosting Chinese debt issuers. In further diversification, in 2019 we expanded our equity derivatives market. Firstly, we introduced derivatives on the Saudi Arabian market, which makes us one of the only exchanges in the region to offer derivatives in both its own and in regional markets. We initially created single stock futures on 12 Saudi Arabian companies in January 2019 before launching futures on the MSCI UAE Index in line with our license from MSCI to launch futures on their regional indices. We also took that template to partner with FTSE Russell, which led to us creating futures on the FTSE Saudi Arabia Index. We are pleased with how the derivatives market has grown since we launched it in 2016. It now consists of 33 products, comprising 17 UAE single stock futures as well as our Saudi single stock futures and futures on four different indices. Our Murabaha solution for Islamic financing was also very active during the year. This platform, launched with Emirates Islamic and utilizing our central securities depository, is one of our key initiatives that enhance Dubai’s Islamic finance offerings. Murabaha facilitates Islamic banks to offer borrowers sharia-compliant financing. Previously, there was no similar platform that could facilitate this in the region. To date, the platform has executed some USD157 billion in transactions.
What other markets and jurisdictions is Nasdaq Dubai looking to expand into?
We are predominantly active in the Middle East and have growing activities in Asian markets. We also create a mix that allows investors from the rest of the world, such as the US and Europe, to participate. In equities, 37% of our liquidity comes from the US, which is substantial. We have 30% coming from Europe, 6% from Asia, and the rest from the Middle East and Africa. This gives issuers an excellent platform to access the world. We have equity issuers from Asia, the US, Europe, and Africa. There is room for growth in equities, especially in a region such as ours that is predominantly debt focused. Fixed income and new product development will also remain a major growth driver for us. We will expand our issuer base, which already includes excellent representation from the region with companies from Saudi Arabia, Kuwait, and Bahrain listed with us, as well as the UAE. Outside the region, we have debt listings from the Indonesian and Hong Kong governments as well as China and look forward to attracting more.
What is your vision for Nasdaq Dubai in 2020 and beyond?
Expo 2020 will give Dubai an unprecedented international reach. We are looking at companies that could benefit from Dubai as a platform, and the expo is a fantastic time for them to assess their options from a capital markets perspective. The driving question is how we add value and ensure that whoever comes to Dubai during the event sees the true potential and capacity here. If Nasdaq Dubai can help a company take its ideas to an audience that stretches from the US to China and get them excited, then we have done our part in being a launch pad for businesses to reach new investors. ✖
What has driven your success over the last few years?
A large part of our success was due to internal restructuring to provide the foundations for growth, and in 2019 we continued to build upon this success. We achieved that growth by resetting and refocusing our strategy on becoming a more member-led exchange; we have over 175 global members, and they are the ones driving the products we list on the exchange. To a degree, our products have to be unique and regionally relevant and innovative. Futures trading, particularly that on a purely price basis, is not sharia-compliant due to its speculative nature. However, we worked with the two sets of sharia scholars Armanie Advisors and Minhaj Advisory to come up with a design for our sharia-compliant spot gold product, whilst receiving additional fatwas as to the veracity of its sharia compliance. When we talk about ‘spot’ products, this infers it is a product that is traded today for delivery tomorrow, whereas derivatives are traded today for a price at a set point in the future. My priority is to make the business more regionally relevant, and the sharia-compliant gold contract is a step in that direction. Our product was the region’s first and is currently the world’s only exchange-listed contract that bridges that gap. We are also the world’s largest liquidity pool for Indian rupee trading outside of India, though we also list other currencies for trading, including G6 and Chinese yuan.
As the exchange is based in the Middle East, how limited is your derivatives trading?
Our client base is global. Although many of our clients are based in the GCC and originate from India, others come from China, Singapore, Europe, and elsewhere. We are in one of the most commercial cities on the planet, so why not tap into the potential here? The derivatives exchange is not widely known in the region, but we decided to base it here because it is a global business. Dubai also offers an advantageous time zone that allow us to remain open during the most liquid parts of the day in Asia, Europe, and the Americas. Recently, we launched aluminum and zinc contracts because our members wanted us to. The UAE is among the top-five aluminum producers in the world, and aluminum and zinc are heavily used in the construction industry.
What other commodities are you looking at to make the exchange more locally relevant?
We have trialed the base metals contracts: aluminum and zinc and, if necessary, lead and nickel. These products also complement our existing copper contracts. There are other emerging markets relevant to Dubai and the GCC that have wealthy clients, companies, and institutional investors exposed to their home currency’s fluctuations. We already deal with currencies, so bringing in another currency is a marginal evolution. All the currencies we offer are paired to the US dollar, so people are trading the reference price against the dollar rather than trading the currency itself. We look at the local market demand, and the nationalities present here are the ones with exposure back home that perhaps do not have the tools to hedge their price risk exposure. We want to offer that currency, to which end I have a dedicated product development team researching new products for us to launch.
Being strong in Indian rupee trading means we not only have a product, but also a fantastic marketing tool, allowing us to promote the hedging of risk with one of the UAE’s largest trading partners. This concentration into one currency is actually working to our advantage and with the recent volatility has opened additional doors for us. That said, we need to diversify, and looking locally at the GCC makes a great deal of sense. All the local banks have their own sharia boards, and the UAE consolidates that into one central bank sharia board. We are working hard with the Dubai Islamic Economy Development Centre (DIEDC) to ensure we are part of that project and process. If our sharia products get certified by the appropriate board, it would certainly provide a boost to the exchange. ✖