(Bloomberg) — Dubai plans to list 10 state-owned companies on its stock exchange to boost the size of its financial market to 3 trillion dirhams ($817 billion) as the Middle East’s business hub seeks to catch up with Abu Dhabi and Riyadh.
The emirate’s Deputy Ruler Maktoum bin Mohammed bin Rashid announced the plan at his first meeting as the head of the securities and exchange higher committee, without providing a timeline for the listings. He also approved a 2 billion-dirham market-making fund to increase liquidity and a 1 billion-dirham fund to support tech IPOs.
The city’s stock exchange rose more than 2% on Tuesday and bourse operator Dubai Financial Market PJSC soared 14%. While it’s not yet clear which state-owned firms will be listed, some key assets include Dubai Electricity & Water Authority and Emirates Airline, whose top officials have said in the past that a decision to IPO rests with the government.
“More government listings might help DFM trading volumes pick up, similar to Abu Dhabi, but the question remains why more private sector corporates do not see the DFM as a useful avenue to raise finance,” said Hasnain Malik, the Dubai-based head of research at Tellimer Research. “The main drivers of Dubai stocks remain the recovery in tourism and deregulation of long-term residency.”
The announcement comes as Dubai tries to revive a flagging stock market. The city has so far missed out on the IPO boom in the Middle East, with just one company going public since 2017. Its only prospect of a listing this year failed when logistics firm Tristar Transport pulled its IPO in April.
Dubai Misses Out on the IPO Boom Sweeping Abu Dhabi and Riyadh
Demand for new stocks has been through the roof in other Middle Eastern marktes. Investors placed more than $34 billion of orders for Adnoc Drilling’s $1.1 billion IPO in Abu Dhabi, while Arabian Internet and Communications Services Co. attracted a whopping 471 billion riyals ($126 billion) in bids for its $966 million offering last month in Riyadh.
Dubai, on the other hand, has seen a series of delistings — from port operator DP World to Emaar Malls and Damac Properties — driven by sluggish trading, a slump in prices and liquidity, and a desire by companies to escape investor scrutiny in a falling market at the time.
Dubai Risks Driving Out Investors as Public Companies Delist
As real estate prices have started to recover, Dubai’s benchmark index has eked out gains, but it still trails peers in Abu Dhabi and Saudi Arabia. Traded volumes and its market capitalization are also lower in Dubai.
The benchmark Dubai Financial Market General Index’s market capitalization currently stands at more than 500 billion dirhams, according to the exchange’s website. An average of 139 million shares were traded daily in the past 12 months and the most active stocks include banks and real estate.
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