The Abu Dhabi Securities Exchange (ADX) is considering listing bonds for the first time in a move that could give a much-needed boost to local debt markets. The creation of a secondary bond market in the emirate could make trading bonds easier and cheaper for investors and the show of interest comes as signs emerge that confidence is returning to the sector. "We have built the infrastructure for [listing] bonds, and are co-ordinating with issuers," said Rashed al Baloushi, the deputy chief executive of the ADX. "We will try to have dual listings."
The ADX would meet soon with issuers, said Mr al Baloushi on the sidelines of an investment forum in Abu Dhabi. So far, neither the Dubai Financial Market nor the ADX list bonds. NASDAQ Dubai and the Saudi stock market list sukuk and bonds, but trading volumes remain low. Corporations or sovereign issuers typically list their bonds in London or Luxembourg. "The development of securities listings on the ADX is being worked on rapidly in the region," Robert Mohamed, the co-head of investment banking at National Bank of Abu Dhabi (NBAD), told the forum. Last week, NBAD became the second company in the region to issue a bond this year when it brought to market a US$750 million (Dh2.75 billion), five-year issue.
The listing move also signals hopes that the regional and local debt markets will continue to grow rapidly. That expansion was halted last November after the debt standstill request by Dubai World. Although regional capital markets remain in their infancy, the debt market is seen as one of the means of choice to raise long-term capital, notably for infrastructure developments. Dubai World's $26bn debt has helped highlight the misalignment between short-term borrowing and long-term projects.
"There must be a belief that the [bond] market will grow. This is the way forward to expand volumes. Eventually investors will move to electronic trading," said Nish Popat, the head of fixed income at ING Investment Management in Dubai. At present, the bulk of bond trading is done over the counter where investors call brokers or banks' trading floors to sell or buy bonds. The spreads in such transactions tend to be much wider. So far the market lacks the depth and size to justify the cost of electronic trading. Less than 5 per cent of such treading is done electronically, where seller and buyer remain anonymous.