March 24, 2010
Gulf’s first ETF to begin trading today on Abu Dhabi bourse
Abu Dhabi
The Gulf’s first exchange-traded fund (ETF), launched by National Bank of Abu Dhabi, will begin trading on the Abu Dhabi bourse today, in a move to attract more international investors.
The new fund, the NBAD OneShare Dow Jones UAE 25 ETF, will provide investors with exposure to 25 blue chip companies in the United Arab Emirates and will be traded on the Abu Dhabi Securities Exchange (ADX).
The launch has been delayed since 2008 in the wake of the global financial crisis.
An ETF is an open-ended investment fund that trades intraday like a share on the stock exchange, tracking a basket of shares or a specific index.
“We see the ETF as being an ideal way for global investors to access the exciting opportunities in our local companies,” said Alan Durrant, chief investment officer at NBAD’s asset management group.
“It has the diversification benefits of a mutual fund and the instant liquidity of a share,” he told reporters.
Over 50% of the ETF’s exposure is to the financial sector, the rest is across other sectors.
Among the 25 stocks listed are Emirates Telecommunications (Etisalat), NBAD, First Gulf Bank, Emirates-NBD, Dubai Islamic Bank, Emmar Properties and DP World.
NBAD is seeding the fund with upto $10mn initially. The minimum investment through subscriptions is 100,000 shares at the opening price of five dirhams ($1.36) while in the secondary market the minimum is one share.
Abu Dhabi’s index is down 44% from its June 2008 high, while Gulf Arab exchanges hugely underperformed emerging markets in 2009 as concerns over corporate defaults and Dubai’s debt position scared off investors.
“The UAE economy is growing and that is positive for the stock market. This is the right time for ETFs,” said Rashed al-Baloushi, deputy chief executive at ADX.
Saudi Arabia is also planning to launch an ETF of Saudi shares which will be accessible to foreign investors, as part of efforts to open up the biggest Arab bourse.
“I wouldn’t say it is competition but having two will make the market bigger,” Al Baloushi said.
First introduced in the early 1990s, the market for ETFs has been growing rapidly. Globally, by the end of 2009, there were 1,947 ETFs with 3,787 listings on 40 exchanges managing about $1tn of assets, according to Blackrock.
Meanwhile, analysts have said Saudi Arabia’s plan to launch ETFs may lure more investors to the biggest Arab bourse but major funds won’t commit large sums without better regulation or the right to buy individual stocks.
