ADX is the new hive for global investors in MENA

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The UAE recently dropped all COVID-19 related restrictions. This also coincided with the announcement that Abu Dhabi’s GDP, in the first half of 2022, rose by 11 percent in comparison to the same period last year. The Statistics Centre – Abu Dhabi (SCAD) has reported an 11.7 percent YoY rise in Q2 of 2022. Another key indicator of good economic performance in Abu Dhabi is the fact that in the end of the first half of 2022, the real GDP value exceeded AED 543 billion, and the value of the non-oil sectors’ GDP increased AED 28.4 billion compared to the same period last year to reach AED 273 billion in total.

The majority of the economic rise in Abu Dhabi came from manufacturing, construction and building activity, wholesale and retail trade and other financial activities. According to data released by SCAD, the mining and quarrying activities (including crude oil and natural gas) contributed 49.7% to the real GDP of the Emirate of Abu Dhabi during the first half of 2022, which means non-oil activities contributed 50.3% at constant prices in spite of the noticeable increase of global oil prices during the same period. The increase in the non-oil sector’s contribution to the real GDP proves the success of the ambitious strategic plans for diversifying the economic base in Abu Dhabi.

Recently, in a press release, H.E. Mohamed Ali Al Shorafa, Chairman of the Abu Dhabi Department of Economic Development (ADDED) said: “The Abu Dhabi economy continues to reap the benefits of the effective policies guided by the wise leadership to strengthen the pillars and foundations of the economy, maintaining a competitive performance while attracting investments with more initiatives to achieve the strategic objectives of Abu Dhabi.”

In a recent press release, H.E. Rashed Abdul Karim Al Balooshi, Undersecretary of ADDED, said: “The vital performance of the Emirate’s economy over the last few years resulted in remarkable growth rates in the non-oil sectors during the first half of 2022, reflecting a competitive outlook of Abu Dhabi’s business ecosystem. Abu Dhabi implemented economic programs in recent years to facilitate the establishment and operation of new businesses across the Emirate, giving the necessary factors that can stimulate growth in various sectors.”

Exchanging Oil for new Scope

Abu Dhabi Securities Exchange (ADX) was established on November 15 2000 by Local Law No. (3) Of 2000, the provisions of which vested the market with a legal entity of autonomous status, independent finance and management. The Law also provided ADX with the necessary supervisory and executive powers to exercise its functions. On the 17th of March 2020, ADX was converted from a “Public Entity” to a “Public Joint Stock Company PJSC” pursuant to law No. (8) of 2020. ADX is part of ADQ, one of the region’s largest holding companies with a broad portfolio of major enterprises spanning key sectors of Abu Dhabi’s diversified economy.

ADX is a market for trading securities; including shares issued by public joint stock companies, bonds issued by governments or corporations, exchange traded funds, and other financial instruments approved by the UAE Securities and Commodities Authority (SCA).

ADX is the second largest market in the Middle East and its strategy of providing stable financial performance with diversified sources of incomes is aligned with the guiding principles of the UAE “Towards the next 50” agenda. The national plan charts out the UAE’s strategic development scheme which aims to build a sustainable, diversified and high-value added economy that positively contributes to the transition to a new global sustainable development paradigm. With a market capitalization of more than AED 2.6 trillion (USD 725 billion) as of 5th December 2022, and 135 listed securities, it is the second largest market in the Middle East. The Exchange’s benchmark index, FADX15, reached a new high with 10,500 points for the first time in ADX’s history.

ADX recently won ‘Best Trading Securities Exchange – MENA 2022’ and ‘Best Trading Derivatives Exchange – MENA 2022’ awards from World Business Outlook. These awards reinforce the successes of the Exchange in achieving several key milestones over the last 2 years. Since the launch of its new strategy at the beginning of 2021, ADX has witnessed a robust listing pipeline and took measures to drive the sustainable growth and enhance market liquidity, which has more than doubled the exchange’s market capitalization. ADX has also launched several innovative new products and services, including the introduction of a derivatives market.

Deriving New Trade Standards

ADX, the award winning exchange, recently revealed that in the first year since the launch its derivatives market achieved AED 1 billion in traded value. In these inaugural 12 months (launched in November 2021), ADX traded over 1 million contracts, 100 percent more than other MENA markets in the region. The Exchange launched with an initial five single stock futures: Etisalat, First Abu Dhabi Bank, International Holding Company, ADNOC Distribution and Aldar Properties. This was followed in June 2022 by the launch of futures contracts on the FTSE ADX 15 (FADX 15) Index, which is one of the best performing indices in the MENA region. In October of this year, ADX added another 5 single stock futures bringing the total number of traded derivatives to 11. ADX’s derivatives market was introduced to provide traders and investors with two-way market exposure, while providing for hedging and leveraging capabilities. It has rapidly become one of the most active in the MENA region due to a blend of strong partnerships and world class infrastructure. It uses central counterparty clearing (CCP) to promote clearing efficiency, stability, and confidence in the market. In addition, market makers continue to provide liquidity, facilitating an efficient and orderly derivatives market.

Saeed Hamad Al Dhaheri, Managing Director and Chief Executive Officer of ADX (pictured above), said, “We are continually working on introducing new products on our derivatives platform and expect trading to expand further in the coming months, as ADX continues to be a vibrant trading hub for both investors and issuers.”

2022 also saw the value of ADX’s Exchange Traded Funds (ETFs) surpassing AED 1.6 billion year to date, with more than 14,000 trades of 273 million units, positioning it as the most liquid in MENA region. This milestone reinforces ADX’s position as a leading regional ETF hub, offering investors diverse investment options, including Sharia-compliant and geographically diverse funds. Since its initiation in November 2020, ADX currently holds eight ETFs including the newly added Chimera FTSE ADX 15 ETF

To support the increased demand for passive strategies and support the exchange’s derivatives market, this year ADX partnered with FTSE Russell to create a suite of indices.  Launched in March 2022, the FADX 15 selects companies by free float adjusted market capitalization and median trading value, while the FTSE ADX Growth Market Index (FADGMI) was introduced in the third quarter. In June, the exchange also introduced FADX 15 futures to provide a new way for investors to facilitate risk management during periods of market volatility.

Speaking on the day of the achievement, Saeed Hamad Al Dhaheri, said, “Reaching this new milestone on the exchange’s ETF market demonstrates the success of the ADX strategy in diversifying our suite of investment products available to investors on the exchange. ADX is committed to enhancing market efficiency and sustainable growth. The ADX ETF market is a testament to our commitment to be the exchange of choice for issuers and investors.”

Promising the Future of Trade

Arab bourses like the ADX have the ability to innovate and introduce an increasingly diversified set of investment opportunities that give it a unique position in the GCC region. ADX is continuously evolving Abu Dhabi’s capital markets to match the needs of the global markets and aims at encouraging the listings pipeline, enhancing corporate governance, and introducing new products and services that meet the requirements of issuers and global investors.

Article by Ujal Nair

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