Interview: Mahmood Ebraheem Al Mahmood
To what extent does the MSCI upgrade promote more stability and enhance the depth of the market? What else needs to be done in this regard?
MAHMOOD EBRAHEEM AL MAHMOOD: The MSCI upgrade for the UAE was a very positive move, but as with all changes of this significance, we must allow time for the benefits to become apparent. GCC regional markets have a very high percentage of retail investors, but the change to emerging market status will encourage more active, institutional investors to acquire UAE equities and assets. The influence of retail investors means that the markets have had higher volatility than comparable exchanges elsewhere in the world. As institutions invest in regional stocks they will lower the level of volatility, encouraging additional investment and ensuring company valuations are more closely aligned with global market levels. This will create a positive cycle, with more companies choosing to list on the UAE exchanges, creating still further stability and more efficient valuations.
All markets are subject to fluctuations in the global economy and Abu Dhabi is affected in the same way. As a new, relatively immature market, it is more susceptible to macro forces, which unfortunately also adds volatility. However, over time this will change as more products, more market makers and greater depth are created. The upgrade in ranking is a significant step in the right direction and has boosted liquidity and interest. However, we must not be complacent and should continue enhancing our capital markets. Abu Dhabi is situated between the markets of Asia and those of Europe, and the GMT+4 time zone is an excellent location to bridge trading and flows between these two markets.
How are advanced trading platforms impacting the development of the foreign exchange (forex) industry in the MENA and GCC regions?
AL MAHMOOD: Investors in this region are demanding better execution, improved pricing and more competitive fees. In terms of forex product offerings, investment in improved technology and the creation of a sophisticated and easy to navigate trading platform is crucial. If done correctly, such a platform can provide greater access to high-quality liquidity and offer very competitive spreads and prices.
We have opted to develop our own, new generation, proprietary multi-asset platform, which is a first for both the UAE and the Middle East. Given the high rate of technological adoption among investors in the region, the platform has performed very well. However, providers must continuously update their software in order to keep pace with the rapidly changing demands of the market and to determine how services can be delivered in a more efficient way. The dollar we trade in the UAE is the same as the dollar traded elsewhere in the world, and for the first time Abu Dhabi is at the forefront in developing the systems that deliver this price to traders.
How will the Abu Dhabi Global Market (ADGM) address some of the challenges that have limited the level of local commodity trading?
AL MAHMOOD: Commodities trading in the UAE is still evolving and, at the moment, investors from the region go to centres where there are market makers setting a price. I am confident that this will change over the next few years as Abu Dhabi continues to develop as a global financial centre. Investors will be looking to the new ADGM to take the lead in developing a commodity offering from the UAE. It has the opportunity to act as a price producer, clearing and settling a full range of commodities and over-the-counter products. Global financial markets run on sophisticated, integrated e-platforms, but trading still requires buyers and sellers, and the liquidity necessary to set a price. The geographical location of Abu Dhabi, the availability of technology and the wealth of the region provide the perfect combination for it to be a key contributor to global markets.
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