Nationwide bourse could be on the cards

The chief executive of the Dubai Financial Market says there have been talks about merging with the Abu Dhabi Securities Exchange.

DUBAI // The three bourses in the country are about to shrink down to two and soon there may be only one. Essa Kazim, the chief executive of the Dubai Financial Market (DFM), said yesterday there had been talks about merging with the Abu Dhabi Securities Exchange (ADX), a move that analysts say could lead to a nationwide bourse. The DFM is already in the process of taking over NASDAQ Dubai in a Dh445.1 million deal and Mr Kazim told reporters he expected to seal that deal within a couple of weeks.

The idea of combining the Dubai and Abu Dhabi exchanges is one that has been rumoured before but the fact that talks have taken place has brokers buzzing. Eyad Abdulnabi, the chief financial officer of Al Ramz Securities in Abu Dhabi, predicted it would be "very positive and healthy for markets". Analysts say a single equities index would probably attract more listings and much-needed liquidity to the floor. Although it would arguably give a bigger boost to Abu Dhabi, said Hassan Awan, an associate at The National Investor in Abu Dhabi.

The daily trading average at the ADX is in the range of Dh630m over the past three years, while at the DFM it is Dh1.2 billion over the same period. Mr Awan said it would be good for ADX to have a more liquid partner. Exchanges in the country have come under pressure to maintain profitability as income from commissions, the main source of revenue for the exchange operators, has slumped in the wake of the economic slowdown and worries on the debt restructuring of major conglomerates in Dubai.

The full-year profit for DFM, which also trades on the Dubai bourse as DFM Co, almost halved last year. The ADX is government-owned. Mr Abdulnabi said brokers traded on both exchanges anyway, but had credit limits on each exchange that were not transferable. Combining the two would allow brokers to trade more actively without taking on additional leverage. It also simply would make life easier for investors, who prefer to be able to focus on a single exchange.

* additional reporting by Hadeel al Sayegh [e-mail]