Dubai will reform its investment system
The Dubai Financial Market (Dubai Stock Exchange) unveiled its investment progress, according to which it will adopt a new methodology for its indices during the last quarter of this year. Exchange officials said in a statement: "The new methodology will include several market indices, including the Dubai Financial Market General Index, the Shariah Index and sectoral indices, which will be calculated by S&S Dow Jones Indices. S&S Dow Jones Indices will provide regular technical support for the mid-term review process to calculate the general index, sectoral indices and the Shariah index based on the index rules.
Experts considered that these measures related to boosting the activity of the stock exchange will be more attractive for ten entities belonging to the emirate. Hamed Ali, CEO of Dubai Financial Market (DFM) and Nasdaq Dubai, noted that this step of developing the methodology and market index ratings "reflects our commitment to further develop our services within the framework of the strategic plan for the development of financial markets in Dubai". Ali noted that this agreement will also help pave the way for the launch of more indicator-related products in the future. One of the main improvements is to reduce the maximum weight of a company from twenty to ten percent.
The Dubai Financial Market explained that this will also lead to "calculating the index based on the actual market value of freely traded shares, and rebalancing the index on a quarterly basis, instead of the semi-annual review". The statement also said the proposed changes were part of a strategic plan to develop Dubai's financial markets by aligning the index methodology and sector rankings with international best practice. The changes follow a wave of initial public offerings by government-linked entities this year, part of a government programme aimed at attracting investors and boosting activity on the stock exchange. The exchange, which opened market consultations on the new index methodology, aims to complete the consultation by 17 October, before launching the revised indices during the fourth quarter.
Last April, the Dubai Electricity and Water Authority (DEWA) raised more than 6 billion in an initial public offering. Last November, Dubai's deputy governor, Sheikh Maktoum bin Mohammed, announced plans to offer ten government-linked companies to boost stock market activity. However, Sheikh Maktoum, who oversees financial markets and stock exchanges in Dubai, indicated at the time that a committee overseeing market development had adopted a target of doubling the size of the financial market to Dh3 trillion ($820 billion).
The listing plans aim to help the Dubai Stock Exchange compete more effectively with the region's largest exchanges, such as those in Saudi Arabia and neighbouring Abu Dhabi. And to strengthen its plans, it launched a Dh2 billion ($545 million) market-making fund within the year to boost trading on the bourse. The Emirate also approved the establishment of a Dh1 billion ($270 million) fund to encourage technology companies to list on the local stock exchange. The Dubai government, which missed last year's IPO boom in the Middle East and North Africa, encouraged private and family-owned companies to offer and list their shares on the financial market.