Interview: Rashed Al Baloushi

How is the ADX helping to develop Abu Dhabi as a regional centre for capital markets?

RASHED AL BALOUSHI: Our first pillar of development is focused on the equity market’s structure. We are trying to build its strength through implementing international best practices and regulations.

We are also enhancing the services the ADX provides its stakeholders. This includes automation of transactions, making processes faster and providing easy access to the market. The second pillar is the diversification of financial products. The ADX has predominantly focused on the equity market but would prefer to have a more diversified basket of options with derivatives and futures.

The third and final pillar is expanding the participation of institutional investors. We currently have many individual retail investors, who provide a lot of liquidity, but take a different approach to institutional investors. Institutions get into the market at the right time, take a long-term view, and have the money to both drive the market and to help make it a more robust overall environment.

What strategy is being pursued to attract foreign investors, especially when considering the conditions in global markets?

AL BALOUSHI: While global market conditions are relatively unpredictable at the present time, there is still money available, waiting to be invested where there is a return. ADX is receiving very positive news about the outlook for the UAE’s economy, including strong year-on-year growth.

Lately, the government of Abu Dhabi has started boosting infrastructure development, which means that public, private and family-owned companies will need to play a greater role in the overall process of development. Furthermore, all the figures show an increase in profits when reviewing economic data from 2011. If an investor looks at Abu Dhabi and compares it to other economies, they can see that there is an opportunity here because it is a market constantly in the process of developing itself.

How is the ADX going about deepening the local debt market and encouraging more businesses to pursue this as a source of financing?

AL BALOUSHI: The ADX has a role in increasing awareness of the debt market and developing programmes to get groups involved. What is most important is being prepared for when clients want to invest in bonds or increase their capital through an initial public offering and ensuring that proper infrastructure and procedures are in place.

An exchange is a financial platform with instruments related to those businesses looking to raise capital. It all comes together and matures with awareness, communication and experience. Looking at debt issuance, commercial operators need to see a benchmark. This benchmark yield curve is always based on sovereign participation, which is the first enabler to strengthening the bond market. Without involvement from government officials, it is not possible to have a strong debt market.

How would local capital markets be impacted if the UAE were to garner an “emerging” market classification from MSCI?

AL BALOUSHI: What is most important is to maintain the global standards and procedures that investors have come to value in the ADX. Some ratings agencies have also upgraded Abu Dhabi from BBB to A-, which is good news. We are always trying to better our position and gaining emerging market status will do a lot for that.

Once this is achieved, we will press on and try to meet the criteria laid out for “developed” market classification. By aligning the market with the G30 and International Organisation of Securities Commissions recommendations, we are developing some of the best-in-class processes for our exchange.