Abu Dhabi stock exchange plans to double market cap within three years

ADQ-owned entity expects ten new listings this year as well as the launch of derivatives trading

The Abu Dhabi Securities Exchange plans to double its market capitalisation over the next three years through its new ‘ADX One’ strategy, which aims to increase market liquidity and improve market efficiency.

Exchange bosses said they expect ten new listings this year, its 20th anniversary year, as well as new services such as derivatives trading.

"ADX today is one of the most competitive exchanges in the region, providing an exciting value proposition for companies and some of the highest dividend yields in emerging markets for investors," the exchange's chairman Mohammed Al Shorafa said in a statement on Wednesday.

With a Dh808 billion ($220bn) market capitalisation, ADX is the second-biggest exchange in the Arab world after Saudi Arabia's Tadawul

Over the course of 2020, its market cap rose by almost 40 per cent to Dh750bn, with the reverse takeover of Taqa by Abu Dhabi Power creating a listed entity with assets of more than Dh200bn.

The exchange, which is owned by state holding company ADQ, expects three new exchange-traded funds to list this year, following the market debut of Chimera Capital's S&P UCITS ETF in August last year. It also expects more listings on its junior Second Market, after four businesses – Sawaeed Holding, Zee Stores, Easy Lease and Palm Sports – joined in 2020.

New services are also being introduced, with derivatives trading expected "by the fourth quarter", the statement said.

Other initiatives being undertaken include the creation of an investor relations guide for companies, campaigns to promote market literacy and the role of equities in investment portfolios and a programme to support the production of research notes on listed entities that are considered to be under-covered.

"Throughout 2021, we will also continue to invest in leading technology solutions, while enhancing our range of post-transaction services and work to become a hub for ESG investments in the region," Saeed Al Dhaheri, chief executive of ADX, said.

The Abu Dhabi Securities Market General Index gained 48 per cent from a March 2020 low by the end of last year as global markets plummeted on investor concerns about the effects of Covid-19 on the global economy.

"ADX has been one of the stable markets in the GCC and the aim to expand by adding more companies is in line with most other exchanges in the region that aim to increase private sector participation in the economy," Junaid Ansari, head of investment strategy and research at Kamco Invest, said.

Trading activity on the exchange "was at a six-year high in 2020", Mr Ansari added, with traded values up 29.7 per cent year-on-year to Dh71.65bn, according to a Kamco Invest GCC markets report published earlier this month. Traded volumes were 46.3 per cent higher as 20.57bn shares traded hands.

"With the recent reforms on the exchange and regulatory oversight, we believe that new listings and new financial products would be instrumental in attracting investments from foreign institutional investors," Mr Junaid said.

Measures such as the introduction of market makers and increasing foreign ownership limits on certain companies have boosted liquidity and attracted more than 400 institutional investors to the exchange last year, ADX's Mr Al Dhaheri said.

"We already have received interest from many companies seeking to list on ADX in 2021, especially in light of the tremendous success of the companies that listed on the Second Market in 2020," he added.

There were seven IPOs across the Gulf's stock markets in 2020, compared to eight in the previous year, PwC's latest GCC Capital Markets Watch survey released on Wednesday, showed. Total proceeds from these listings stood at $1.6bn, compared with $27bn in the prior year when Saudi Aramco undertook its record-breaking IPO.