Secondary listing of Abu Dhabi debt marks first for the bourse The Abu Dhabi Securities Exchange will soon welcome its first sovereign debt listings as it seeks to encourage more bond trading in the capital. The market regulator has approved a secondary listing of bonds issued by Abu Dhabi's Department of Finance (DoF). The two tranches, worth US$1.5 billion each, have their primary listing in London with maturities in 2014 and 2019. "The listing of Abu Dhabi government bonds on both ADX and LSE will help to create a more attractive investment climate in the Emirate," Hamad Al Hurr Al Suwaidi , the chairman of the DoF said yesterday. The Securities and Commodities Authority's approval follows the introduction of a series of draft regulations aimed at encouraging local debt issuance and listings. The regulator is seeking feedback from market participants for the new rules, amid hopes for them to be ratified into law by the start of next year, Obaid Al Zaabi , director of research and development at the SCA, told Bloomberg yesterday. DoF's secondary listings are an important milestone for the Abu Dhabi bourse, which has made its intentions clear since 2010 that it wants to become a viable platform for bond trading. With 68 equities listed, the ADX is hoping that the DoF's two tranches will encourage more corporate and sovereign entities to follow suit. "The big challenge is to convince the issuer to list their bonds here," said the ADX chief executive Rashed Al Baloushi in a telephone interview with The National yesterday. "For us, as a market, we are ready in terms of infrastructure and procedures to deal with bond listing, trading and even over-the-counter trade. The regulator already has the law." Mr Al Baloushi said there would be no issue regarding the listing of foreign currency-denominated bonds on a dirham-based exchange. Ahmad Alanani, Middle East director at the investment bank Exotix , which specialises in illiquid bonds and loans said the DoF's move is "good for corporate governance, it sets a precedent when a government becomes the first to offer its debt issues, it opens the door for more issues, and improves the level of disclosure". At present, the ADX has only subordinated convertible notes from National Bank of Abu Dhabi that mature in 2016. The bulk of bond trading in the UAE market is done over the counter, with investors calling brokers or banks' trading floors to sell or buy bonds. The spreads in such transactions tend to be much wider. So far the market lacks the depth and size to justify the cost of electronic trading. Less than 5 per cent of such trading is done electronically, in which seller and buyer remain anonymous. Issuers have traditionally opted for London over the Abu Dhabi and Dubai bourses for listings, and bankers have typically advised their clients to issue their debt abroad. "It's a habit, and obviously it triggers money to leave this region, because most of the investors in these issues are from here," Mr Al Baloushi said. The two new listings come amid a rise in market activity and trading values boosted by reignited investor interest in local shares. Stocks listed on the ADX General Index have risen more than 50 per cent this year, while Dubai's main benchmark has surged more than 95 per cent. That compares with a more than 80 per cent drop for Dubai's index from the 2008 global financial crisis to 2011, as investors lost appetite for riskier assets. "I think they are trying to route some of these investments to the fixed income," said Tariq Qaqish , the head of asset management at Al Mal Capital , a Dubai -based investment bank. "The regulators are trying to establish a full-fledged financial market and create more depth by listing other asset classes such as fixed income and sukuk. They are bringing more financial tools for investors to choose from." email@example.com
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