Dubai to launch international bourse

This week's opening of an international stock exchange in Dubai marks another step towards its goal to become the global financial hub between Hong Kong and Frankfurt.

    The bourse will have no trading floor, just a computer network

    The Dubai International Financial Exchange, or DIFX, starts

    trading at 2pm (1000 GMT) on Monday with a modest

    listing of five stock index certificates tracking major

    European, Japanese and US markets.

    It will be a subdued beginning by this wealthy emirate's standards.

    "In Dubai, there's always a tendency to have fireworks at

    grand openings," DIFX chairman Lynton Jones said.

    But the veteran Nasdaq executive

    and former chief of the International Petroleum Exchange admitted 

    "there will be no financial or real fireworks here on day

    one".

    The fireworks could begin by next month, however.

    IPO mania

    A regional telecom company, Lebanon's Investcom, has

    announced it will be the first company listed on the DIFX,

    offering shares to the world's investors in an initial

    public offering next month.

    Recent IPOs in Dubai and other Gulf states have been

    hugely oversubscribed, with shares rocketing to absurd

    values.

    The Economy Ministry cancelled several planned

    offerings until regulations could be updated.

    On Sunday, tens of thousands of Saudi investors crossed

    the border to participate in a natural gas producer's

    IPO.

    "If we launch the market with an exciting IPO on day one,

    we'd be inviting the sort of frenzied activity that takes

    place in this part of the world during those events.

    We don't want that"

    DIFX chairman Lynton Jones

    Crowds of investors clashed with police when banks

    could not accommodate share demand.

    With the world's big stock markets providing lacklustre

    returns, the new Dubai bourse, with headquarters in a

    futuristic steel-and-glass Arc de Triomphe, could attract

    intense global interest.

    Realising this, Jones said the DIFX is testing its

    computer trading system by first issuing sedate index

    certificates, which can be monitored because they are

    traded elsewhere.

    "If we launch the market with an exciting IPO on day one,

    we'd be inviting the sort of frenzied activity that takes

    place in this part of the world during those events," he

    said.

    "We don't want that. We want to behave responsibly

    and make sure the whole thing works."

    Target companies

    But Jones and Dubai's ruling shaikhs hope the market will attract

    small and medium-sized foreign companies from the United Arab

    Emirates and beyond to list shares in Dubai, with the

    promise of strict market regulation and oil-rich Gulf Arab

    investors.

    Small, newer companies are expected to be the easiest to

    recruit.

    "In London or New York they are small fish in a big

    pond," Jones said. "Dubai is an intermediate environment.

    They become bigger fish and they still have access to the

    international investor."

    DIFX has opened listing talks with about 200 companies in

    the Middle East, India, South Africa and China, Jones said.

    The bourse has its headquarters
    in a steel-and-glass building

    By the end of the year, Jones hopes to have close to 20

    firms listed, through IPOs.

    Previous

    reports have valued those offerings at between $50

    million

    and $1 billion.

    Some future listings, like those of Chinese companies,

    will be exclusive to the DIFX. Others, like those in South

    Africa and India, will be secondary to listings on home

    bourses, he said.

    By contrast, most Middle Eastern stock exchanges,

    including the other two in the UAE, list only local

    companies while restricting foreign ownership of shares and

    international banks from becoming brokers or members.

    Nasdaq characteristics

    The DIFX borrows characteristics from New York's Nasdaq

    exchange, quoting shares in US dollars and existing

    solely as a computer network without a trading floor.

    For

    now, the DIFX will buy and sell shares for only three hours

    a day, between 2pm and 5pm local time (1000 and 1300 GMT).

    And, like the world's biggest exchanges, the DIFX promises

    transparency and strict regulation

    , in contrast to

    freewheeling local bourses with scant disclosure

    requirements.

    The Dubai exchange stands to benefit from surging

    demand for Islamic financial products - bonds, debt

    instruments and, perhaps, future stocks that comply with s

    haria law, Jones said.

    The market will also offer international investors access

    to exchange-traded funds that track the currently red-hot

    Middle Eastern markets,

    Jones said.

    At launch, the DIFX is to carry only index certificates,

    issued by Deutsche Bank, that track the US Standard &

    Poor's 500 Index, Japan's Nikkei 225, Europe's blue-chip

    Dow Jones STOXX 50 and EURO STOXX 50, and Germany's DAX.

    SOURCE: Agencies


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