Abu Dhabi Securities Exchange announced its five years Strategic Plan (2008-2012) under the slogan "Excellence among Regional Stock Markets" during a press conference held yesterday at the Rotana Beach Hotel. Mr. Tom Healy, Chief Executive of the exchange opened the conference by stating that “ADX strategic plan is aligned with the vision of Abu Dhabi Government for a confident and secure society and an open, global and sustainable economy”. Mr. Healy added that the strategic plan emphasizes ADX’s commitment to transparency and high standards of governance, and involve the community with the market’s effort to develop and improve. Mr. Healy also stated that the strategic plan will be reviewed annually and amended when necessary to correlate with the continuing changes in the business environment, and taking into consideration the needs of investors, listed companies and brokers
According to Mr. Rashed Al Baloushi, Deputy Chief Executive, ADX aspires to become the market of choice in the region. He explained that “achieving this vision requires achieving two main objectives - increased contribution to growth and stability in a broader economy, and credible enforcement of standards and market infrastructure that attract international investors and strategic partners”.
Achieving the above objectives depends on the implementation of seven priorities as follows: increasing institutional participation, enhancing the quality of market intermediation, strengthening the equity market, providing infrastructure for a domestic debt market, introducing new products, promoting the implementation of best practice regulatory framework, and investing in social and physical infrastructure.
In addition, Mr. Al Baloushi mentioned that ADX strives to support the UAE as an international economic center, be a representative of Abu Dhabi in global economic forums, and be a leader among regional stock exchanges in mobilizing savings for investments.
Increasing Institutional participation
Increasing institutional participation in their market is one of ADX’s main priorities, in promoting Abu Dhabi as a preferred destination for international investment. Mr. Al Baloushi said that “one of the most important challenges in this area is to work with the regulator to develop the regulatory framework in order to provide the infrastructure that attracts institutional investments”. ADX completed a number of initiatives, including signing custodian agreement with HSBC and National Bank of Abu Dhabi in order to encourage institutions to invest in ADX.
Enhancing the quality of market intermediation
According to Mr.Al Baloushi, the second priority of enhancing the quality of market intermediation highlights ADX’s focus on working with the financial intermediaries to help investors make sound investment decisions. This priority also contributes to the stability of the stock exchange through the brokerage companies’ provision of new services such as financial analysis and market-making, as well as encouraging brokerage companies to apply financial solvency regulations and develop a more sophisticated administrative structure. Mr Al Baloushi added “several initiatives were completed by the market to achieve this priority including posting brokerage companies’ violations on ADX website, organizing professional mediation through the issuance of appropriate decisions and the coordination with the Securities & Commodities Authority, and holding a variety of training programs for brokerage firms.
Strengthening the equity market
Mr. Al Baloushi explained the importance of strengthening the equity market, which is the main investment channel for local small investors. Thus, the development of the stock market serves the interests of the UAE. ADX has embarked on many initiatives such as encouraging listed public companies to implement corporate governance standards issued by the Securities and Commodities Authority, an electronic link with Muscat Securities Market, and signing memoranda of understandings with a number of regional and international stock exchanges and depository institutions. Mr. Al Baloushi added that the average daily traded value increased by 375.6% from AED 250 million in 2006 to around AED 1.2 billion in the first quarter of 2008. Foreign investments increased by 77% from 14.9% in 2006 to 26.3% in the first quarter of 2008.
Debt market and new products
Mr. Al Baloushi stated that the fourth priority is to provide for new methods to finance projects, and the fifth priority aims to provide new investment products that contribute to the diversification of investments and better risk management. He noted that “the main challenge to achieving the fourth priority is to work with the Government to issue benchmark bonds and create an active debt market, while the most important challenge for the fifth priority is advising on the appropriate legislation to create and list new investment products”. ADX is active with many initiatives, including working on the creation of Exchange Traded Funds, signing memorandum of understandings with some international stock exchanges which include the incorporation of Exchange Traded Funds. ADX also signed a strategic partnership agreement with New York Stock Exchange Euronext. The agreement includes establishing a market for derivatives.
Best practice regulatory framework
Mr. Al Baloushi said “the sixth priority of promoting the implementation of a best practice regulatory framework is aligned with Abu Dhabi Government’s efforts to implement principles of governance in the Abu Dhabi Departments and the economic development strategy announced by the Ministry of Economy, which emphasized developing the legislative system”. The main challenges for ADX and the regulator are to implement international best practices, which will facilitate the growth of foreign investments and raise global awareness of Abu Dhabi and the UAE. Among the initiatives carried out by ADX are adopting International Financial Reporting Standards in the disclosure of the financial statements. ADX submitted a number of legislative drafts to the competent authorities, including on, financial solvency standards, and the listing of investment funds.
Mr. Al Baloushi pointed to the adage of His Highness Sheikh Khalifa bin Zayed Al Nahyan, may God protect him, the President of the UAE "We must harness the full potential of the state and its resources to building the active individual who is the cornerstone of the entire national process". Since nationalizing the brokerage profession is important to the national economy, ADX emphasizes investment in the social infrastructure. ADX contributed to the SHARE program developed by the Securities and Commodities Authority through an agreement to train students who participate in the program. The market also sponsored several social activities, including contributing towards mass marriages for people with special needs.
Mr. Al Baloushi said that “the strategic plan took shape after extensive studies and reviews of international best practices”. He concluded by emphasizing the importance of the participation of the private sector in achieving the vision and development of the stock exchange.