Nasdaq Dubai chief in pole position on Islamic finance

Hamed Ali feels the bourse he heads is at an advantage after unveiling a new trading platform.

Hamed Ali says "we give companies the choice of a market with international standards, but at the heart of the Arabian Gulf region". Sarah Dea / The National
Beta V.1.0 - Powered by automated translation

The business of Nasdaq Dubai is business. After a period when little seemed to be happening at Dubai’s international exchange, it has suddenly become a blur of activity.

Hamed Ali, the exchange’s chief executive, is pleased at that. “Nasdaq Dubai was very quiet for a while, but now we have activity and potential. We’ve been very busy, but more important we’ve been successful at what we’ve been doing. That’s very important.”

Alongside the strong revival in the emirate’s economy, Nasdaq Dubai is at last showing signs of fulfilling the potential envisioned when it was set up nine years ago.

Just in the past week, it has unveiled a new platform for trading murabaha – Sharia-compliant financial instruments – and yesterday, celebrated its first real initial public offering for five years. (Bank of London and Middle East listed on the exchange last year, but because it did not raise new money, cannot really be called an "offering").

At a ceremony at DIFC’s Gate building yesterday, Mr Ali was joined by other Dubai luminaries in welcoming Emirates Reit, a property investment trust, to the market, some three-and-a-half times oversubscribed as the Dubai property market goes into overdrive.

Emirates Reit closed 5.9 per cent at US1.44 on its first day of trading yesterday.

Mr Ali hopes, and expects, it will be the first of many. “A lot of activity is healthy for the market, and it benefits the exchange, the economy and the issuers. The time is right, especially with the upgrade to emerging market status, and the infrastructure is ready, thanks to regulation by the Dubai Financial Services Authority. We give companies the choice of a market with international standards, but at the heart of the Arabian Gulf region,” he says.

An IPO like Emirates Reit is welcome, as other new listings would be. But many financial professionals believe that for Nasdaq Dubai to really take off, a quantum leap is needed.

A few weeks back, that eventuality appeared to be coming closer, with the announcement that Dubai's sector leader, Emaar Properties, was contemplating a listing of its shares worth up to Dh9 billion, on Nasdaq Dubai and in London.

Mr Ali declines to talk about the possibility of Emaar adding a big chunk of liquidity to the exchange, currently dominated by trading in DP World, by far its biggest company by market capitalisation. “Let’s wait and see,” he says.

However, he did not wait long after the announcement by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, just over a year ago that Dubai should aim to become the “capital of the Islamic economy” before setting in train a series of initiatives to deliver the financial side of that goal.

In the past 12 months, Nasdaq Dubai has pushed Islamic financial initiatives in several areas. “Sukuk is a key area and always will be a key area. Most sukuks are originated in this region, so growing in that market fits in very well with the Islamic strategy,” said Mr Ali.

The growth of sukuk business in Dubai, and the launch of the murabaha trading platform, sparked speculation in some quarters that Nasdaq Dubai was “challenging” London, which has traditionally been one of the largest centres for trading Islamic financial instruments.

Mr Ali reels off the statistics. “Today we are a viable alternative. Some US$20bn worth of sukuk is listed in Dubai, compared to $24bn in London. Dubai is much larger in terms of the value of sukuk issued since 1996. But most of the trading business is through over-the-counter methods in London, not on an open market.”

Dubai is working on a scheme to introduce a fixed-income trading platform, for both conventional bonds and sukuk. Mr Ali says the plan is at the “pilot stage”.

On the broader issue of competing with London in Islamic products, however, he is not willing to declare an all-out war against the UK capital. “Of course, we look at what London does, but the main aim is not to take on London. We compete with London, but at different levels. You should really ask the issuers. Which market is fulfilling your requirements?

“Most Islamic financial players are based in this region, we are closer to the users geographically. As to which is the more Sharia-compliant, I would have to suggest you ask the Islamic scholars, and leave it to them to decide.”

Mr Ali has been in the role of permanent chief executive of Nasdaq Dubai since last summer, after a stint in an acting capacity. Before that, he was involved with the Dubai International Financial Centre in various capacities, and with the DIFX (the precursor of Nasdaq Dubai). His career began with the successful launch of Dubai Internet City and Knowledge Village free zones.

He refuses to be drawn on two of the big issues facing UAE financial markets: the presence of a potential rival to Dubai in the Abu Dhabi Global Market, and the possible consolidation of the other two exchanges in Dubai and Abu Dhabi, for the simple reason that neither is his responsibility.

Nasdaq Dubai, on the other hand, is his charge now, and he is steering it his way: “The murabaha initiative filled a serious gap. Other exchanges will want to compete, of course, but we have a unique advantage.”

Follow us on Twitter @Ind_Insights