Abu Dhabi Securities Exchange (ADX) announced today that Exchange Traded Funds (ETFs) are an ideal diversification tool for the Gulf capital markets and reaffirmed their strategy to list them.
Speaking at the Financial Brokerage in the Gulf Forum in Abu Dhabi, Rashed Al Baloushi, Deputy Chief Executive and Director of Operations at ADX, explained how ETFs work, how they have performed in other markets and how they would work when listed on ADX.
“An ETF is a collective investment vehicle that trades on a stock exchange, similar to a listed security”, Mr Al Baloushi explained. “They offer investors a portfolio of securities that imitates the performance of a particular market or index. With just one trade, investors could have exposure to a wide variety of securities, therefore diversifying their portfolios and spreading their risk,” he continued.
ADX has been working with international organisations and experts specialised in ETFs, closely evaluating success of ETF products in other parts of the world and analysing the opportunities for Abu Dhabi and the wider Gulf region.
Mr Al Baloushi cited research saying that globally, ETF uptake has been accelerating rapidly, with considerable appetite coming from South East Asian and Middle East investors. He also said that in Europe, during the first six months of this year, net sales of ETFs increased by €21.9 billion, while in the same period, net sales of mutual funds decreased by €63.1 billion .
“ETFs have proved themselves to be popular with both retail and institutional investors and we would like to give investors the opportunity to trade ETFs on ADX”, commented Mr Al Baloushi.
“Not only are they a way of diversifying, but they tend to be more cost-effective than mutual funds, as well as more accessible, flexible, liquid and transparent.” He concluded.
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