Amlak IPO to start a UAE stock market boom

Indeed, the UAE bourse gave back some of its New Year gains last week as investors withdrew funds to participate in the IPO. But the point to watch is when the IPO is over and investors have to decide where to put their money again.

They may well decide that the best place to invest is the UAE stock market itself, if they have been disappointed by the number of shares allocated to them in the Amlak Finance IPO.

Often in stock markets it is a key IPO that sparks the interest of investors. The 1984 privatization of British Telecom is a famous text book example.

Of course, the stock market has to be ripe for expansion. Step forward the UAE bourse with its modest price to earnings ratio of 16.8 and dividend yield of 3.11.

For historic precedents we do not have to go far back in time. In 1998 the UAE stock market was trading on a price to earnings ratio of over 30.

A lot has happened since then. The UAE now has two active electronic trading floors - in Abu Dhabi and Dubai. In 1998 there was an only an over-the-counter market with paper share certificates and non-nationals were excluded.

The Emirates Securities and Commodities Authority is also now in existence to ensure greater transparency and further market reforms. For example, the ESCA is pushing for the timely publication of financial results, and a unified trading platform, as well as the listing of all public joint stock companies.

Last but by no means least, the UAE economy is booming. And yet the stock market has barely kept pace with developments. In an emerging economy as wealth as the UAE surely this is not a phenomenon that can continue for long.

It does not need much imagination to see that the excitement and publicity surrounding the Amlak Finance IPO this week is just the trigger required to set the UAE stock market alight; especially if its share price soars, but investors receive a disappointing number of shares.