UAE allows co-operatives to trade shares on local stock exchanges

The UAE Cabinet on Thursday approved a decision to let co-operative associations trade their shares on the local financial markets.

Listings will allow co-operatives, which are primarily supermarkets and retail businesses, to raise new capital from outside and expand their portfolios, the state-owned news agency Wam reported.

Access to capital markets will also boost the co-operatives' contribution to the national economy, improve their competitiveness and help the industry profit, Wam said.

The development comes as Dubai plans to list 10 government and state-owned companies on the Dubai Financial Market as part of a broader strategy to double the financial market's size to Dh3 trillion ($816.7 billion) in addition to a slew of successful initial public offerings on the Abu Dhabi Securities Exchange (ADX), the second largest market in the Arab world.

In October, Fertiglobe, the world’s largest seaborne exporter of urea and ammonia combined, raised about $795 million from its listing on the ADX. That offering came after that of Adnoc Drilling, which reaped $1.1bn from its listing in the same month. In July, Al Yah Satellite Communications, better known as Yahsat, a unit of Mubadala Investment Company, raised about $730m through its listing.

Dubai also plans to launch two funds with a total value of Dh3bn to boost trading on the stock markets and encourage small- and medium-sized companies to list on its financial markets.

Emirates Central Cooling Systems Corporation, better known as Empower, as well as government-owned utility company Dubai Water and Electricity Authority and Dubai road toll system Salik will be listed on DFM in the coming months.

Tecom, the owner and operator of investment free zones in the emirate, will also be listed as part of the plans revealed by officials last year.

To increase activities of market makers on DFM, last month, Dubai launched a company to help the bourse attract more capital.

The company, called xCube, aims to develop and adopt algorithms and technology to perform market-making activities and high frequency trading on both cash equities and derivatives listed on local markets.

The recent decision to allow co-operatives to list their shares is expected to lead to local financial markets establishing special platforms for the registration, trading and transfer of the stocks of co-operatives.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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COMPANY PROFILE

Company name: BorrowMe (

BorrowMe.com)

Date started: August 2021

Founder: Nour Sabri

Based: Dubai, UAE

Sector: E-commerce / Marketplace

Size: Two employees

Funding stage: Seed investment

Initial investment: $200,000

Investors: Amr Manaa (director, PwC Middle East)

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if you go

The flights

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Who are the Sacklers?

The Sackler family is a transatlantic dynasty that owns Purdue Pharma, which manufactures and markets OxyContin, one of the drugs at the centre of America's opioids crisis. The family is well known for their generous philanthropy towards the world's top cultural institutions, including Guggenheim Museum, the National Portrait Gallery, Tate in Britain, Yale University and the Serpentine Gallery, to name a few. Two branches of the family control Purdue Pharma.

Isaac Sackler and Sophie Greenberg were Jewish immigrants who arrived in New York before the First World War. They had three sons. The first, Arthur, died before OxyContin was invented. The second, Mortimer, who died aged 93 in 2010, was a former chief executive of Purdue Pharma. The third, Raymond, died aged 97 in 2017 and was also a former chief executive of Purdue Pharma.

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The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.

- Abdullah Ishnaneh, Partner, BSA Law