The chief executive of the Abu Dhabi Securities Exchange, Rashed Al Baloushi, called news of the inquiry an "unfounded rumour". Delores Johnson / The National
The chief executive of the Abu Dhabi Securities Exchange, Rashed Al Baloushi, called news of the inquiry an "unfounded rumour". Delores Johnson / The National

ADX chief denies alleged trading investigation into Sorouh and Aldar

The head of Abu Dhabi's stock-market denied yesterday it had launched an investigation into unusual share price movements of Aldar and Sorouh prior to Sunday's announcement of a planned US$15 billion (Dh55.09bn) merger.

The chief executive of the Abu Dhabi Securities Exchange (ADX), Rashed Al Baloushi, called news of the inquiry an "unfounded rumour".

The exchange "carries out daily routine checks on all share trading activities through highly sophisticated electronic surveillance systems which can detect any instance of share trading violations," Mr Al Baloushi said in an email statement.

"The exchange does not perform any investigations unless it was highly confident that trading law have been violated, which did not happen in the case of Aldar and Sorouh share trading."

The head of surveillance operations, Abdullah al Naimi on Monday told The National he was "very suspicious" as the two stocks traded in lockstep days ahead of the announcement of the proposed merger that would create a property giant with assets worth $15bn.

The shares of Aldar and Sorouh both closed at identical prices on three consecutive days - Dh1.11 on Wednesday, Dh1.13 on Thursday and Dh1.22 on Sunday - before the companies announced they were weighing up a merger.

Prior to this, Aldar had been trading at a premium of 10 per cent to its smaller rival Sorouh.

Mr Al Naimi has said investigations began on Sunday morning into why the share price movements were identical.

Analysts and investors remained puzzled.

"There is nothing wrong to say we monitor the movement of stocks," said Mohammed Ali Yasin, an independent analyst in Abu Dhabi. "However, the question that still begs is: in the three days prior to the announcements, why at those levels and how come they are moving before the market?"

Both stocks closed at Dh1.34 on Monday, but yesterday Aldar rose to Dh1.36, while Sorouh closed at Dh1.37.

The shares should not be trading at the same price, said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi.

"There are different valuations, what we see as upside of different entities. But in our mind they shouldn't be trading lockstep.

"Right now we don't know what Aldar and Sorouh have in mind in terms of exchange ratios in terms of shares," he said.

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Name: Xpanceo

Started: 2018

Founders: Roman Axelrod, Valentyn Volkov

Based: Dubai, UAE

Industry: Smart contact lenses, augmented/virtual reality

Funding: $40 million

Investor: Opportunity Venture (Asia)

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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Starring: Adwa Bader, Yazeed Almajyul, Khalid Bin Shaddad

Rating: 4/5

The currency conundrum

Russ Mould, investment director at online trading platform AJ Bell, says almost every major currency has challenges right now. “The US has a huge budget deficit, the euro faces political friction and poor growth, sterling is bogged down by Brexit, China’s renminbi is hit by debt fears while slowing Chinese growth is hurting commodity exporters like Australia and Canada.”

Most countries now actively want a weak currency to make their exports more competitive. “China seems happy to let the renminbi drift lower, the Swiss are still running quantitative easing at full tilt and central bankers everywhere are actively talking down their currencies or offering only limited support," says Mr Mould.

This is a race to the bottom, and everybody wants to be a winner.

Profile of Udrive

Date started: March 2016

Founder: Hasib Khan

Based: Dubai

Employees: 40

Amount raised (to date): $3.25m – $750,000 seed funding in 2017 and a Seed+ round of $2.5m last year. Raised $1.3m from Eureeca investors in January 2021 as part of a Series A round with a $5m target.

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