GCC to establish common stock exchange

by Joel Bowman on Tuesday, 04 March 2008
COMMON EXCHANGE: A collective Gulf stock exchange will likely come after the introduction of the common currency, experts said. The GCC may look to form a common stock exchange after establishing a currency union, planned for 2010, the head of the Abu Dhabi Securities Market (ADSM) said on Monday.

“You will see in this region a common capital market and securities market after the Gulf common currency,” Tom Healy, ADSM director general, told newswire Bloomberg, adding that the exchange would start “some years” after regional monetary union.

However, the common currency may not happen for some years after the official 2010 deadline, which many analysts believe is now impossible to meet.

The deadline was cast into doubt in 2006 when Oman indicated it would be unable to meet the required convergence criteria to participate, and was dealt a further blow in May last year when Kuwait depegged its dinar from the dollar blaming the falling US currency for driving up inflation.

Gulf states pegged their currencies to the dollar in preparation for the GCC monetary union and single currency.

Nasser Saidi, chief economist at the Dubai International Financial Centre (DIFC), said last month the deadline was "highly ambitious, largely because of the divergences in conditions within each of the GCC countries”.

Nevertheless, international investment interest in the GCC markets lends impetus to establishing a common, accessible marketplace.

Currently most countries in the region operate single country exchanges, such as the Doha Securities Market and the Saudi Stock Exchange (Tadawul), while the UAE operates two domestic exchanges and one international exchange.

Fahd Iqbal, Gulf equities analyst for EFG-Hermes Holding SAE, expects a Gulf market to occupy a broader sector space, resembling the pan-European exchange, Euronext NV.

“While I don't think the local bourses will disappear, I do see a possibility for a Euronext-style merger,” Iqbal said, according to Bloomberg.

“Fund managers still look at this region country by country, but in a couple of years they'll start looking at it by industry sector as they do in Europe."