Dubai Financial Market has launched a new platform to help family businesses and small companies raise money as an alternative to initial public offerings.
Companies can access capital through diverse assets including equity and debt through the Arena platform, the DFM said on the sidelines of the Capital Market Summit in Dubai on Wednesday.
Venture capital firms can also expand their investor base by selling private market shares and accessing more liquidity as part of the new initiative.
The new platform supports growth opportunities for both companies and investors.
“For companies seeking to raise over Dh35 million [$9.53 million], Arena offers cost-effective access to an extensive network of investors and fosters a collaborative approach with transparency throughout the process,” the DFM said, while adding the new platform serves as a regulated alternative to conventional financing routes and helps private companies access capital markets directly.
Family businesses and small and medium enterprises play a vital part in the UAE’s economy.
About 90 per cent of private companies in the country are family-owned, a report by the UAE Ministry of Economy says. They also employ more than 70 per cent of the private-sector workforce.
Family businesses operate in a range of vital sectors including property, construction, retail and wholesale trade, hospitality and tourism, manufacturing, financial services, health care, education and technology.
“Arena acts as a catalyst to enhancing the funding ecosystem for growth companies, paving the way for a more vibrant and inclusive investment ecosystem,” said Hamed Ali, DFM's chief executive.
“Through a technology-powered platform, Arena is designed to facilitate seamless processes, including due diligence, book building, brokered trades and settlement, fundamentally reshaping the landscape of investment accessibility and efficiency.”
Global factors helping Dubai capital markets
Meanwhile, the capital market's growth in the broader Middle East – especially in Dubai – will continue, a senior government official and investment bankers told degates at the summit. This is driven in part by ample liquidity in the region, the stellar performance of the regional markets, as well as continued flow of foreign investments into the region, they said.
“The thing that we've seen is that people have started to think about where they booked their capital, where their money is managed from,” said Helal Almarri, chairman of the DFM and director general of Dubai Department of Economy and Tourism.
“It doesn't necessarily mean that they choose Dubai as the only hub, but in addition to London or wherever else, they want a second or a third hub to manage wealth from and Dubai is the beneficiary of that global trend.”
He added development of the market is an integral part of the D33 agenda.
“It's an integral part of the ecosystem and an integral part of the economy and that was recognised as we started to look towards the future,” Mr Almarri, said.
“The first thing that happened was making sure we have the right governance, the right watchdog … processes, rules, regulations. When that full clean-up was done, and since then, there's been a number of IPOs, both of public sector companies and private sector companies.”
Launched last year, D33 aims to double the size of Dubai’s economy, with a target of reaching Dh32 trillion by 2033.
“Today, people are looking here, capital is looking here. People are looking where are the bright spots, so it's only natural that a regional market emerges, and we're on that journey,” he said of DFM’s growth prospects amid the investment flows and IPO momentum.
“We're at the early stages of that journey, but when you look towards the future, you know, you have the right regulation.”
Companies continue to list their shares on DFM amid strong growth in the UAE’s economy.
In November 2021, Dubai said it would list 10 state-owned companies and establish a Dh2 billion market maker fund to encourage listings from private companies in sectors such as energy, logistics and retail.
The government aims to expand the size of the emirate's financial market to Dh3 trillion. Six state-owned enterprises have listed on the DFM since 2022.
Investors' interest in region set to continue
Momentum in the Middle East capital markets will continue even if the US markets come back strongly, according to Rudy Saadi, managing director and head of Mena equity capital markets at Citi.
“It doesn't mean that international investors will lose interest in the Middle East,” Mr Saadi, said.
“They want to diversify, yes, but within the Middle East, in retail, consumer, health care, education, utilities, for example.”
The dividend yield concept has been very supportive for the region and performed very well “but maybe it’s time to move to the next step.
“We need to bring [to the market] more sophistication with the tech and fintech companies,” said Mr Saadi.
Meanwhile, Gokul Mani, managing director and head of Ceemea (central and eastern Europe, Middle East and Africa), equity capital markets at JP Morgan said international investor interest still remains very high in the region.
“The regional asset manager community, if you really dial back and look at 10 years ago, we did not have a very developed regional asset management community here that has grown leaps and bounds.”
He said a number of good quality assets have listed on the regional exchanges but what will help in going to extend the IPO run will be assets from new sectors.
Infrastructure, hydrocarbon stories “have done their work and there are other assets – tech and tech-enabled – that'll probably take it from here on”, Mr Mani added.
“There's also a real need for shareholders wanting to monetise, whether it's private or government and it's from a position of strength.”
Further sector diversification would pave the way for more growth opportunities to come on the exchange, Samer Deghaili, co-head of the investment banking of Menat at HSBC, said.
“We see technology sector as an opportunity for the investors to invest in high growth companies … as Dubai is an incubation hub for a lot of tech companies.”
