Abu Dhabi Bourse Expects Market Recovery Late 2009

By Zainab Fattah and Arif Sharif

Jan. 25 (Bloomberg) -- The Abu Dhabi Securities Exchange, one of three stock markets in the United Arab Emirates, expects the local benchmark index to recover later this year after it lost 47 percent in 2008.

“One of the signs markets are very close to the bottom is very low liquidity,” Tom Healy, director general of the Abu Dhabi Securities Exchange, said in an interview today. Average volume on the Abu Dhabi bourse dropped 55 percent to 123 million shares in the second half of 2008 from 275 million shares in the first half, Bloomberg data show.

Gulf Arab stock markets, seen as a diversification hedge against global routs in the past, have become increasingly correlated with world markets as foreign investors and investments increased. Stock markets in the U.A.E., the second- biggest Arab economy, are not immune to turmoil in global financial markets, Healy said in March.

Share prices in the region have slumped since the onset of the global credit crisis as foreign investors fled, lending grew scarce and on concern the region’s once booming real-estate industry is poised for a slowdown. Saudi Arabia’s Tadawul All Share Index fell 56 percent in 2008, while the benchmark index in Dubai dropped 72 percent. Abu Dhabi’s benchmark index has fallen 8.4 percent this year.

Share Offers

Companies around the world are showing no interest in initial public offerings temporarily and will wait “until markets settle down and a recovery starts,” Healy said. “At that stage, we’ll get the IPOs coming back and there will be a strong pipeline here.”

The Emirates Securities and Commodities Authority, the United Arab Emirates’ market regulator, is studying several applications for IPOs from companies in Dubai and Abu Dhabi.

The regulator expects “few” IPOs this year and will consider their size and timing to avoid “sucking lots of liquidity out of the market,” Abdullah Al Turaifi, chief executive of ESCA, said in an interview today.

The Abu Dhabi exchange has spoken to index provider MSCI Inc. about including Abu Dhabi companies in its measures. The bourse currently lists companies including Emirates Telecommunications Corp., the second-biggest Arab phone company by market value, and National Bank of Abu Dhabi PJSC, the United Arab Emirates’ second- largest bank by assets.

Abu Dhabi’s benchmark index rose 2.4 percent to close at 2,188 points today, its first advance in four days.

To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net; Arif Sharif in Dubai at asharif2@bloomberg.net