Nasdaq Dubai, the emirate’s international stock market, has struck a deal with Egyptian financial authorities that could lead to dual listings of companies on both markets.
The deal, announced in Dubai by Hamed Ali, the chief executive of Nasdaq Dubai, and Mohamed Salam, chairman of the Egyptian body Misr for Central Clearing, Depository and Registry (MCDR), is the first of its kind for a UAE exchange, and could herald similar deals with other exchanges.
The accord “aims to create operational connections that will support seamless trading of securities on both stock markets,” a joint statement said.
“MCDR and Nasdaq Dubai also intend under the agreement to promote broad capital markets cooperation between the UAE and Egypt.”
Mr Ali said: “This is a landmark event and major stepping stone for Dubai.” He added that Nasdaq Dubai was in early negotiations with other exchanges “within six hours’ flying time from Dubai” with a view to clinching similar deals.
“Nasdaq Dubai is important for Egypt because it is a window on the world to international markets,” said Mr Salam.
The Egyptian stock exchange – with a market capitalisation around US$72 billion – is bigger than Nasdaq Dubai, valued at $29bn. But Egypt is seeking greater liquidity and international exposure for its equity markets, Mr Salam said.
“As an international exchange, Nasdaq Dubai can provide businesses with unmatched global visibility and reach to underpin their expansion in the Middle East and beyond,” he added.
Mr Ali said: “Egypt is home to many first-class companies that are well placed to take advantage of the international springboard that Nasdaq Dubai provides. We will build on our positive relationship with MCDR to create many new links with Egyptian businesses and capital markets participants.”
Both executives stressed that the plans are at an early stage.
However, there was agreement that the new arrangement might be attractive to UAE companies like Emaar, which is in the process of assessing plans to float its Egyptian business via an initial public offering.
Arabtec, with a big Egyptian business to build $40bn worth of residential property, was also mentioned as a possible candidate for dual listing, although it is currently listed on the Dubai Financial Market.
“Arabtec? Why not? It would be welcome, as would any Emirati company,” said Mr Salam.
Dual listings would require the approval of the Dubai Financial Services Authority, the regulator for Nasdaq Dubai, and the Egyptian Financial Services Authority, the Cairo financial watchdog.
There are no Egyptian companies currently listed on UAE exchanges. One, the Commercial International Bank, was delisted from the Abu Dhabi Securities Exchange in 2010 because of lack of trading activity.
Mr Ali said that Nasdaq Dubai officials would be spending more time in Egypt in coming months assessing the practicalities of implementing the agreement. “We will be talking to a lot of organisations,” he added.
One challenge is the fact that stocks on Nasdaq are quoted in US dollars, whereas the Egyptian pound is standard in Cairo. “The currency risk will be managed by the client. There are lots of opportunities for arbitrage in the proposed plan,” added Mr Salam.
MCDR is the Egyptian body responsible for clearing and settlement of stock trades, and is linked to other international clearing organisations like Euroclear and Clearstream. It is owned by banks, brokers and the Egyptian stock exchange.
Nasdaq Dubai already shares a trading and settlement system with DFM.
fkane@thenational.ae
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