Mashreq will allow foreigners to own up to 20 per cent of its shares following approval from the market regulator, a move that is expected to boost trading activity for an otherwise illiquid stock.
In a regulatory filing, the lender requested the Dubai bourse to "kindly initiate necessary process" that would result in the foreign ownership limit increasing from from 1.9 per cent to 20 per cent, effective from yesterday.
Mashreq’s shares are illiquid and have traded on just 13 days so far this year. The decision to open up the bank’s foreign ownership limit is expected to alleviate challenges for investors who typically struggle with entry and exit positions.
The Al Ghurair family holds a controlling stake of 70 per cent, while 20 per cent are free float, according to Bloomberg data.
“Foreign ownership is one angle, another is the free float and obviously increasing the investor audience,” said Fadi Al Said, the head of equities at ING Investment Management in Dubai. “In my opinion, the issue with Mashreq is its free float.”
After the last trade, made on August 25, there was a surge of 10.4 per cent to Dh54 a share.
“Mashreq’s stock is very cheap,” said Mr Al Said. “Because its illiquid, it corrected after the global financial crisis and stayed at the bottom, whereas peer UAE banks are trading at one to two-year highs.” The shares currently trade at 0.58 to 0.6 times book value, he said.
The decision comes just three months after the UAE was upgraded to emerging market status by MSCI, whose equity indexes are tracked by investors with about US$7 trillion in assets.
It was previously designated as a frontier market.
“This is a global trend and it will happen for the rest of the UAE companies like Etisalat,” said Fathi Ben Grira, the chief executive at Mena Corp, an investment company in Abu Dhabi. “The fact that the bank [Mashreq] did it provides a signal for other companies to follow,” Mr Ben Grira said.
Mashreq lent more during the second quarter than during any full-year period since 2008 as the Dubai economy recovered.
The bank reported net profits for the second quarter of Dh402.5 million, an increase of 25.6 per cent compared with the corresponding period a year earlier.
The bank forecast its upcoming profits to be driven by the increase in loans.