ADX sees rapid acceleration in access for foreign investors

Business Bureau, Gulf Today

Abu Dhabi Securities Exchange (ADX)  on Thursday reports on its performance for the six months ending June 30, 2020. The report focuses on the exchange’s efforts in supporting Abu Dhabi’s economy through the development of its capital markets, building a strong platform for growth and foreign investment as the easing of COVID-19 restrictions continues.

In the first half of 2020, ADX made significant progress in achieving its ambitions to become a leading international exchange and attract more foreign investors, as well as to develop a more varied domestic investor base. Four companies raised their limits on foreign ownership: Methaq Takaful Insurance Company raised its limit from 25 per cent to 40 per cent; Wahat Al Zaweya Holding went from 0 per cent to 49 per cent; Agthia Group increased its limit from 0 per cent to 49 per cent; and Abu Dhabi Islamic Bank took its permitted level of foreign ownership from 25 per cent to 40 per cent. This means that since the end of 2019, an additional Dhs6.3 billion of stock in these companies is currently accessible to foreign investors, across three separate sectors. In total, 55 companies on ADX are currently accessible to foreign investors, representing 80 per cent of the total exchange. In addition, on July 1, 2020, Abu Dhabi National Energy Company completed the merger of its energy and water assets with certain of Abu Dhabi Power’s. The transaction added more than Dhs100 billion to ADX’s total market capitalisation, increasing it by 20 per cent to Dhs607 billion at time of writing. Taqa is now one of the largest companies on ADX.

ADX also saw increased levels of interest from the expatriate investment community, with a 25 per cent increase in the number of non-UAE nationals registering to invest in ADX compared to H1, 2019. This demonstrates the growing levels of awareness of the investment opportunities available on the exchange. The largest proportion of expatriate investors by country were from the UK, who traded Dhs5.2 billion of shares in the period, followed by those from the US (Dhs4.1 billion) and then Luxembourg (Dhs1.2 billion.)  During the period, 1,723 new investors traded on ADX for the first time, of which 1,497 (87 per cent) came from the retail community, further evidence of increased interest from a broader range of investors and providing a further boost to liquidity.  Total trading value (buy + sell) for the period was Dhs40.7 billion (H1, 2019 Dhs54.7 billion), 14.2 billion shares were traded (H1, 2019: 14.6 billion) and total market capitalisation at June 30, 2020 was Dhs494.6 billion ( June 30, 2019: Dhs519.9 billion).

The year-on-year decrease was inevitable in view of COVID-19, and was similar to the experience of other exchanges around the world. Moreover, ADX reacted swiftly and proactively to the pandemic, offering support to all of its stakeholders by installing state-of-the-art business continuity systems to enable the proper functioning of the exchange.

One such example was the introduction of remote e-voting services for Annual General Meetings (AGMs) of companies, without charging any implementation fees. The measure addresses the need to provide value-added services to support the private sector, in light of the market turbulence caused by COVID-19. The approach is aligned with ADX’s business development strategy and commitment to comprehensively utilize digital services to achieve higher customer satisfaction, while actively enhancing the global business environment.

The SAHMI integrated digital platform, first unveiled in 2018, and continuously updated since then to meet the needs of new technology advancements, was of particular importance, as it provides an integrated system that enables investors to manage their everyday transactions via their mobile devices, thereby reducing human interaction. ADX continues to put digital transformation at the heart of its growth strategy, and expects to announce further progress in this area during the second half of the year and beyond.

At the end of May, ADX was declared the winner of the 2020 Best Trading Innovation Excellence - GCC Award at the Capital Finance International (CFI) annual event. This was a significant endorsement of the leading role the exchange has played in innovation, through the development of a range of digital products and initiatives. The CFI Awards seek out organizations that contribute significantly to the convergence of economies and truly add value for all stakeholders.  Finally, on June 21,  2020, ADX published its inaugural Environmental, Social & Governance (ESG) Report, the first exchange in the region to do so. The publication of the ESG report demonstrates ADX’s commitment to transparency, by encouraging its listed companies to follow its lead in adopting such policies.