Listings of exchange traded funds (ETFs) are helping to boost the “depth of the UAE markets in terms of product offerings” and attracting new investors, according to a top executive of Abu Dhabi-based investment company Chimera Investments.
Chimera Capital, a subsidiary of Chimera Investments, listed its Turkish equities-focused Sharia-compliant exchange-traded fund (ETF) on Abu Dhabi Securities Exchange on Tuesday.
“This is our ninth ETF listing in the UAE markets,” Chimera's chief investment officer of public markets, Sherif Salem, told The National in an interview.
“It adds to the suite of ETFs that we’ve already launched … the overall strategy is to help contribute to increasing the depth of the UAE markets in terms of financial products that are available to investors in the region.”
ETFs are a basket of securities comprising stocks, bonds, commodities or other financial assets that track global markets. They are popular with retail investors because of their low fees and easy access to a range of diverse assets.
Global ETF assets are poised to more than double to $12 trillion by the end of 2023, and could reach $25tn by the end of 2027, BlackRock said in a May 2018 report.
In August 2020, Chimera Capital launched the first ETF tracking a Sharia-compliant index through the UAE’s two main stock exchanges. The Chimera S&P UAE Sharia ETF has two different share classes that track stocks listed in Abu Dhabi and Dubai.
The company listed its Chimera S&P UAE Sharia ETF — Share Class A — in Abu Dhabi, and did a separate listing for the Share Class B category on the Dubai Financial Market.
Earlier this year, the company also listed the Chimera S&P KSA Sharia ETF, as well as the Chimera S&P Kuwait Sharia ETF on ADX.
As of the end of July, Chimera's ETFs traded a total of Dh300 million ($81.68m), with a monthly average trading value of Dh42.8m compared with Dh18.6m last year, according to the company. Chimera’s ETFs have surpassed Dh500m in assets under management with the latest launch, according to Mr Salem.
“We are helping to contribute to the overall depth of markets in terms of offerings,” Mr Salem said.
“Any market needs more than equities. ADX has done an amazing job of offering derivatives, we had a listing of Spac (special purpose acquisition company in May) … it is just our contribution to that development.”
ADX launched a derivatives market in the fourth quarter of 2021. A new benchmark FADX 15 Index was unveiled in March following an agreement with FTSE Russell to develop co-branded indices. The FADX 15 futures contracts was launched in June 2022, as the first index futures on the exchange’s derivatives platform.
With a market capitalisation of more than Dh2.1tn, ADX is home to some of the region's biggest companies, including International Holding Company and its subsidiary Alpha Dhabi Holding, Aldar Properties, First Abu Dhabi Bank, Adnoc Distribution and Fertiglobe, among others.
The exchange plans to double its market capitalisation over the next three years through its ADX One strategy that aims to increase market liquidity and improve market efficiency.
Mr Salem is bullish about ETFs and said it is a “product that can be marketed to everyone".
“If you look globally, it’s for anyone, from retail to institutional to sovereign wealth funds and in fact, central banks … Bank of Japan is engaged in buying ETFs because it is a diversified product and gives you the performance of the stock market," he said.
The latest launch comes as ties between Turkey and the UAE strengthen. In November, the UAE formed a $10bn fund to support investment in Turkey following talks between UAE President Sheikh Mohamed and Turkish President Recep Tayyip Erdogan.
“Turkey is one of the biggest markets in the region,” Mr Salem said.