Aldar opens share ownership to non-UAE nationals

Foreigners will then be able to own up to 40 per cent of shares in Aldar Properties whose stock is expected to be attractive both to expatriates and international institutions looking for a long term investment in the UAE capital city.

Other listed property groups in Abu Dhabi are expected to follow the Aldar lead in obtaining permission for foreign equity ownership, and will be watching the process with interest.

Part of the reason for the creation of these publicly listed companies in the first place was to widen share ownership and bring maximum flexibility to their capital structures for enhanced financial performance.

Foreign ownership of shares will enable groups to lower the cost of obtaining capital by achieving higher credit ratings, and make it easier to organise a rights issue at a later stage. This should also add stability to ownership patterns as foreign institutions are usually long term holders of stock and not day traders.

Share buying patterns

Analysts will now be studying Aldar's progress with interest. A renewed interest in the shares from national buyers can be expected before the stock is actually available for non-national ownership.

These buyers will be looking to profit from the enhanced value of shares that can be owned by foreigners, and should likely bid up the price.

Then the market will judge whether this is the right price or not. If a lot of foreign buyers emerge immediately then the price will go up. If the foreign buyers think the price has gone too high, they may hold back and let it fall to a level that they find acceptable.

This is pure market economics. But liberating the ownership of shares in a major public company is a key economic reform, and the market's reception usually contains a few surprises.

Very positive news

However, the level of international institutional investment interest in Abu Dhabi property, and Aldar shares are a proxy for this market, is huge. And longer term, whatever the initial reception this development should be positive news for the stock.

One parallel that can be drawn is with Emaar Properties of Dubai whose shares crashed in 1999, and revived after a decision to open up the share register to foreign ownership. Aldar Properties has seen its shares drop heavily in the 2006 crash and will be hoping for a similar change of fortune.

But early foreign buyers of Emaar shares might recall the years of waiting for the exceptional performance that only really happened in 2004-5. Whether it will be different this time, only time will tell.