The board of Dubai Islamic Bank, the emirate’s biggest Sharia-compliant lender, yesterday approved a plan to increase the amount of the bank’s shares that foreign investors can buy – to 25 per cent from 15 per cent.
The move comes amid demand by global institutions to hold more shares in UAE companies.
“With the improved overall economic climate as well as the spectacular performance of DFM [Dubai Financial Market] over the last year, we were under increasing pressure to allow greater liquidity for foreign investors, particularly the institutional funds,” said Adnan Chilwan, the bank’s chief executive.
When it comes into force next year, the MSCI upgrade of UAE stock markets to emerging status from frontier status is expected to attract Dh1 billion in investments into listed companies.
“The bank’s stock is up significantly so far this year and we remain confident that, with a return to growth, we will continue to fulfill our commitments to all our stakeholders,” Mr Chilwan said.
Shares of DIB have risen 164 per cent this year, outperforming a 104 per cent gain in the benchmark DFM General Index. Banks have benefited from higher loan growth and fewer defaults as the country’s recovery from the financial crash of 2008-2009 picks up speed.
Earlier this year, in an effort to boost its loan growth, the bank offered to buy the shares it didn’t already own in the home financing company Tamwel. Demand for homes lifted residential property prices in the UAE by about 30 per cent this year after a 65 per cent drop in 2008, according to Cluttons, a real-estate agency.
As well as the MSCI upgrade, a recovery in the profit of companies in the UAE as well as potential future growth after Dubai clinched the right to host World Expo 2020 has not gone unnoticed by foreign investors.
So far this year, 510 new institutional investors have dipped their toes into the Abu Dhabi stock market, Rashed Al Baloushi, the chief executive of the Abu Dhabi Securities Exchange, said this month.
Listed companies in Abu Dhabi on average had a 5 per cent increase in net income in the third quarter this year compared with the same period last year, and will continue to benefit as the Government spends more on infrastructure projects, Mr Al Baloushi said.
However, the number of overall global institutional investors is small when compared with the majority of the 932,000 investors in the Abu Dhabi market who are individual or retail investors.
Economists expect the economy to grow 4 per cent this year and by at least the same amount next year after Dubai won the right to host the Expo.
Other banks and companies besides DIB have been weighing an increase in foreign ownership or have done so already.
Rules on ownership that prevent foreigners from owning more than 49 per cent of companies, and in some cases – such as Etisalat – limit ownership to Emiratis, still deter or frustrate global investors.
DIB, which said in August that is second-quarter profit rose 35 per cent to Dh418.2 million, still needs regulatory approval for the foreign ownership limit to be expanded.