DFM launches new general index amid thriving IPO and trading activity

Move is expected to provide greater transparency for investors and enhance global best practice, stock market says

DFM chief executive Hamed Ali, S&P's Charbel Azzi and other executives at the bell-ringing ceremony to mark the launch of new DFM general index. Photo: DFM

The Dubai Financial Market launched a new general index along with eight sectoral indices, as well as a Sharia index on Monday after a comprehensive transformation of its indexes methodology.

The new indexes provide various market participants with world-class, investable and tradeable benchmarks for the DFM equity market, the bourse said in a statement.

S&P Dow Jones Indices will act as the calculation agent of the new indexes.

“The index transformation caters to the ever-growing demand from various investors’ categories towards DFM’s investment opportunities, whether to participate in the thriving IPOs that placed us at the centre stage globally or to trade on the market,” said Hamed Ali, chief executive of the DFM and Nasdaq Dubai.

The launch of the new index comes amid a series of recent initial public offerings that have boosted the market capitalisation, daily trading volumes and investor numbers of the bourse.

The bourse more than tripled the number of investor accounts in the first seven months of 2022 amid Dubai's push to boost liquidity by listing state-owned companies.

Last year, the emirate announced plans to list 10 state-owned companies as part of its strategy to double the size of its capital market to Dh3 trillion and attract foreign investment.

The emirate also unveiled plans to set up a Dh2 billion market maker fund to encourage the listing of more private companies in sectors such as energy, logistics and retail.

Brokers operating on the DFM added 20,552 investor accounts between January and July 2022, up from 5,306 in the same period in 2021.

Trading values on the DFM increased by 75 per cent during the first half of the year to Dh49.4 billion, while the total market capitalisation of listed securities increased to Dh527 billion, compared with Dh411 billion at the end of 2021, according to the exchange data.

“The new general index provides a series of enhancements for investors, including 10 per cent threshold caps, quarterly rebalancing, independent methodology oversight and index calculation based on actual free-float,” Mr Ali said.

“The transformation also includes eight sectoral indices, as well as the DFM Sharia Index.”

Before shaping the final methodology, the DFM offered market participants the opportunity to provide counsel on its draft during a consultation period between October 3 and October 17, 2022.

“Our aim is to offer rules-based and robust index solutions that suit the needs of the local markets and enable market participants to meet their investment objectives,” said Charbel Azzi, head of the Asia-Pacific region, the Middle East and Africa at S&P Dow Jones Indices.

Key features of new DFM indices:

— Capping the threshold of a DFM index individual constituent at 10 per cent of the index weightage instead of the current 20 per cent, hence limiting the effect of a few companies on the index.

— Index calculation based on actual free float-adjusted market capitalisation.

— Quarterly rebalancing of the index, replacing the current semi-annual review.

— An independent DFM index committee that oversees current and future methodology changes.

— The alignment of the DFM’s sectors with the Global Industry Classification Standard that is tracked by institutional clients.

— The new sectors are communication services, consumer staples, materials, real estate, utilities, financials, industrials and consumer discretionary.