Dubai Regional Exchange a project to watch

This week saw the launch of the Dow Jones DIFC Arabia Titans 50 Index, a new index based on the top 50 stock market listed companies that are also open to foreign investment. The last point is crucial, for it means the xenophobic Saudi stock market will not be included.

However, this index is a clever move by the Dubai International Financial Centre as it prepares to launch the Dubai Regional Exchange - a regional stock and bond market. For the new index will include all the companies that the DRE would like to see listed in Dubai.

If these 50 Arabian Titans find the new index useful in encouraging investment in their shares, then they are all the more likely to stump up the fee the DRE will ask for a stock market listing.

The whole rationale for the DRE is to create a larger and more liquid capital market for regional companies. The new index is a way of starting to get them on board, and Shuaa Capital is already planning to launch a mutual fund based around the new index.

Dubai is already a magnet for foreign direct investment and trade finance, so it makes sense to have the regional bourse in the city. Moreover, the Western standards of regulation applied in the Dubai International Financial Centre will reinforce this attraction.

It is to be hoped that the DRE will also spur many more Arabian companies to open their shareholder bases to foreign direct investment and to remove obstructions to foreign ownership which do nothing to benefit the companies concerned and serve only to protect the self-interest of certain individuals.

Perhaps even these individuals will begin to realize in time that being quoted on a regional stock market is to their advantage. For one thing their shares are likely to have a higher valuation, and also be easier to sell in the market.

It would be an overstatement to say that the Dubai Regional Exchange is a revolutionary project, but it is certainly a catalyst that could spark a good deal of change in regional capital markets and push the separation of ownership and management.