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Since the beginning of this year, the UAE financial markets have been witnessing remarkable recovery and have managed to absorb the multiple variables that have a positive correlation with the performance of world financial markets, such as plunging oil prices and the variables of the surrounding political geography, as well as the impacts of quantitative easing and the government lending policy pursued by Europe and the US, plus the fluctuating economic indicators and the Chinese financial markets.
The UAE securities markets managed to reverse their performance from negative in 2015 to positive in 2016 by more than 6 percent, going back to their 2014 performance levels. During the first half of 2016, the volume of trading surged to about 72.5 billion shares while the total trading value amounted to some AED96.2 billion. Moreover, the total market value rose to around AED767 billion, an indicator that those markets succeeded in overcoming the negative effects of those previous factors on investors and winning back investor confidence in domestic shares.
Dr. Obaid Saif Al Zaabi, Acting CEO of the Securities and Commodities Authority (SCA), added that thanks to the directives of H.E. Eng. Sultan bin Saeed Al Mansoori, Minister of Economy and SCA’s Board Chairman, SCA’s efforts in the past five years were met with success when the UAE markets were reclassified from frontier to emerging. SCA moved forward with its vision and strategy for the next five years; it worked on building the legislative and supervisory structures with the aim of having the markets reclassified to be at the top of developed markets, in line with the UAE’s 2021 comprehensive strategy.
To this end, and as part of the 2016 annual operational plan, Dr. Al Zaabi explained that SCA has been issuing several regulations, such as those concerning mutual funds, the primary market, central clearing, cross-border securities trading, governance rules and institutional discipline standards, and efficiency and appropriateness controls for licensed companies and accredited persons in the securities industry.
In the next half of this year, SCA will issue regulations to put into action a plan to have the UAE markets reclassified from emerging to developed, which involves:
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Regulations concerning the promotion of securities.
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Regulations concerning mergers and acquisitions: in implementation of the GCC regulations concerning integration with the other GCC markets and regulation of mergers and acquisitions in the UAE, as well as in implementation of the new commercial companies law.
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Regulations concerning options: to enable investment service providers to hedge against investment risk effectively, in line with the market development plan.
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Regulations concerning credit rating: to license credit rating agencies and encourage debt instrument issuance and listing.
Dr. Al Zaabi said that innovation in drafting regulations and pieces of legislation as well as creativity in devising methods for awareness and education are the most important characteristics in regulating securities markets, which emphasize the significance of the role of financial services and products and market mechanisms by creating an innovative supervisory framework using risk-based analysis and assessment and financial technology, also known as fintech.
Dr. Al Zaabi also stressed the importance of enabling entrepreneurs to get sufficient funding necessary to support economic sectors, including small and medium enterprises (SMEs), by drafting regulations to offer securities, such as shares, bonds, sukuk, and other financial products.
