Shares of DP World rose 4.6 per cent on low volumes after five consecutive sessions of declines as the global ports operator delisted from the London Stock Exchange. Yesterday was the last day of trading and listing for DP World in London and its shares closed there up at £11.50. each.
Fund managers and brokers yesterday said the moves by DP World and the property developer Damac, which from this month traded shares in Dubai, should signal whether there is a compelling argument for companies that previously sought listings in London to consider having their stock traded on the UAE bourses.
“I think it’s a very good move when a listed company tries to rationalise and consolidate the number of stock exchanges in order to concentrate on the most liquid exchange and liquidity is not divided across different markets,” said Sebastien Henin, the head of asset management at Abu Dhabi-based The National Investor. “It’s better one company is listed in one market where liquidity is enough rather than two exchanges where liquidity is average.”
Nabil Farhat, a partner at Al Fajer Securities in Abu Dhabi, said that companies usually delist if there is no trading in their shares. It can be cumbersome if a company has more regulatory commitments and has to adhere to different sets of standards of disclosure – especially if they don’t have the liquidity, Mr Farhat said.
“A company has to pay annual fees to the exchange,” he said. “It’s not free, so you have to pay money. So if there’s no activity on it, or volumes, there’s no sense of keeping it there.
“You also have to pay money for the actual listing, to build a compliance team in the company to meet the different reporting standards and adhere to two different regulations.”
After the 2008 financial crisis, a handful of companies listed in London in the absence of liquidity on the Abu Dhabi Securities Exchange and the Dubai Financial Market.
Traded value on the DFM dropped from Dh305.14 billion in 2008 to a low of Dh32.08bn in 2011, according to research from Abu Dhabi’s NBAD Securities.
On the ADX, volume dropped from Dh231.95bn in 2008 to Dh24.72bn in 2011.
DP World sought a secondary listing in London in 2011, arguing that it needed a wider shareholder base in the absence of liquidity on the Nasdaq Dubai.
“When you are a listed company, if your liquidity is not great, you are subject to a discount compared to the theoretical price,” Mr Henin said.
“The more shareholders and retail investors, the more liquid your name is, you will not be punished with a discount on your valuation.”
In 2012, Abu Dhabi Capital Management listed one of its funds on London’s Alternative Investment Market. In that same year, Al Noor Hospitals Group and NMC Health, listed their shares on the LSE.
Damac listed its GDRs in December 2013, but then offered investors a swap deal for equity shares on the DFM. The stocks began trading this month.
“Let’s see how the liquidity will shape with Damac,” Mr Henin said. “In London, it was very much institutional driven. They will have better visibility in their home country and they will benefit from better liquidity.”
halsayegh@thenational.ae
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