Engaging greater numbers of investors - DFM’s experience

Following his participation in the recent retail investor panel at the 57th WFE Annual Meeting, His Excellency Essa Kazim, Chairman of Dubai Financial Market (DFM) writes about DFM’s own experience with this important investor segment.

A 17-year period is not that much in terms of the history of global capital markets, yet these years have been momentous enough for Dubai Financial Market (DFM) to influence the characteristics of stock exchanges across the Middle East and North Africa region.

Through the creation of a fair, transparent and world-class trading environment, DFM has successfully played a pivotal role in wealth creation as it has engaged greater numbers of investors and market participants. In fact, we have penetrated almost every household in the United Arab Emirates, where you often find one or more DFM investors.

The establishment of DFM in 2000 symbolised the beginning of a new era in the financial markets in the UAE, with the introduction of a highly regulated electronic market that replaced the traditional Over-the-Counter trading based on physical stock certificates.

DFM quickly overcame various challenges that it faced when it launched. Undoubtedly, one of the immediate issues in this period was the need to educate traditional investors, convincing them to hand over their printed stock certificates, which they usually used to do transactions in an unregulated and opaque market that had no clarity on bids, offers or prices. It was a crucial change in the investors’ mindset as many of them felt it was almost impossible to handover the valuable certificates that were the main evidence of their ownership.

Through its journey, DFM has above all played a pivotal role in providing local and international investors with lucrative investment opportunities that enabled them to participate in the rapidly growing economic sectors in Dubai. The number of DFM-listed companies has increased from 10 in 2000 to 62 companies in 2017.

Accordingly, the DFM has amassed an enormous and diversified investor base including local and international investors exceeding 840 thousand, with retail investors representing the vast majority. As mentioned earlier, you can barely find a UAE household without a DFM investor. As many as 535,000 UAE Nationals are registered on the market, representing 63% of DFM’s investors and 58% of all UAE Nationals. Engaging a greater number of investors with retail investors at the forefront was one of our main missions. To achieve this, we have implemented widespread awareness campaigns. Additionally, our market has attracted several IPOs with incredible levels of participation whether in terms of the number of investors or subscribed funds. For instance, the IPO of DFM Company itself in 2006 attracted 200 billion dirhams, way beyond the desired amount of 1.6 billion dirhams. This IPO in particular is one of the best examples of our leadership’s vision to expand the ownership base and create wealth for larger numbers of the public through participation in the success story of one of Dubai’s prominent institutions.

As DFM employs best practices and systems of surveillance and market control, investors actively participate in our market with full confidence that their interests and rights are fully protected. DFM has registered total trading value of 2.7 trillion dirhams since inauguration in the year 2000 to date. Market velocity has exceeded the global average in most years and has jumped above 100% level in some years. Velocity has stayed at approximately the 40% level in 2016 and the first half of 2017.

Additionally, DFM has provided an effective financing platform for listed companies, as they implemented IPOs or capital increases through the market to carry out their expansion plans. Many of our listed companies have greatly revolutionised economic sectors in Dubai including: Real Estate, Banking, and Investment Services. These companies have raised approximately 40 billion dirhams through IPOs and capital increases on DFM.

With the expansion of awareness campaigns and due to the fact that we have employed the most advanced trading technologies from the very beginning, we constantly educate investors on various aspects of investment in listed securities. We have developed the Smart Borse Strategy in order to develop a comprehensive range of smart solutions that have facilitated market accessibility such as; smart phone applications, electronic services and the smart eIPO platform.

These efforts have been beneficial in increasing the market’s activity. For instance, the daily average trading value jumped from just 2.14 million dirhams in 2000 to 1.506 billion in 2007. After a sharp decline during the years 2009 - 2011 due to the global financial crisis, the daily trading average began accelerating again starting in 2012, reaching AED 1.516 billion dirhams in 2014 with the implementation of a number of successful IPOs on our market. To date, in 2017, daily average trading value is approximately 500 million dirhams.

Similarly, the Market Capitalisation of DFM-listed companies jumped from 21 billion dirhams in 2000 to its peak of 500 billion in 2007. Currently, the Market Cap is 388 billion dirhams.

In conclusion, we deeply believe that DFM’s successful experience in engaging hundreds of thousands of investors, and retail investors in particular, in trading activity creates a solid foundation for more successes to come, especially as the market has developed world-class trading and clearing systems and regulations. We deeply believe that the widespread implementation of DFM’s Smart Borse Strategy will enable greater number of market participants to access our services through smart tools, strengthening what has been accomplished so far in order to achieve the national strategic goals of the UAE and fortify Dubai’s leading position as an international financial hub.