Dubai's Loss Is Saudi's Gain As Βirms Look to Move Listings

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(All Cap) Islamic social Surge in Islamic IsDB to US asset managers 1100 1,078.67 1050 ę nance to assume ę nancing invest in target Muslims, 1,058.07 1000 more prominent expected as science and Christians and 950 -1.9% role in Malaysia’s federal cabinet technological Jews with faith- 900 W T F S S M T next ę nancial approves innovations based investment sector blueprint...5 domestic Sukuk to tackle portfolios...6 Powered by: IdealRatings® issuance...5 COVID-19...6 COVER STORY 8th April 2020 (Volume 17 Issue 14) Dubai’s loss is Saudi’s gain as ϐirms look to move listings

The delisting of DP World back in comparison, DFM was worth around international investors. And there are February lost NASDAQ Dubai its US$1.1 billion, with 67 companies listed, some who now question whether the most valuable stock, and came as a while ADX came in at US$757 million. size of the local market really requires serious blow to the emirate’s eě orts three exchanges for similar products, to boost liquidity on its domestic DP World decided to delist due to its suggesting that NASDAQ Dubai might exchanges. But while DP World had long-term strategy, which it said was do beĴ er to bow out of the equities sound strategic objectives for its incompatible with the short-term view game altogether and focus on its more departure, IFN has learned that there of the public market, and its emphasis successful segments of Sukuk and could be a groundswell of other ę rms on shareholder returns. This may be futures. seeking to switch — and as the largest true, although the wisdom of the move and most liquid market in the region, has been debated — with the 19.5% of Seeking alternatives Saudi’s Tadawul is likely to be the outstanding shares being acquired at It is not just NASDAQ Dubai, however. biggest beneę ciary. Given Saudi’s almost a 30% premium by its parent and There has been, IFN has learned, a strict approach to Islam, what, asks majority owner, the state-owned Port and growing trend toward companies LAUREN MCAUGHTRY, would be the Free Zone World, the deal will increase considering the option of leaving Dubai implications for these companies when the ę rm’s debt by over US$8 billion. It altogether to move to more liquid, it comes to Shariah compliance? is a risky move, given the central role highly traded locations such as London, that DP World played in Dubai’s 2009 Singapore — and, of course, Saudi Playing catch-up debt crisis, and both Moody’s Investors Arabia. NASDAQ Dubai has always been Service and Fitch Ratings have already considerably smaller than its closest placed it on review for downgrade. “When DP World announced its plans regional competitors, Dubai Financial to delist in February, a handful of market (DFM) and Abu Dhabi Securities But no maĴ er what the future other entities scrambled to consider Exchange (ADX). And while it has made holds for DP World, the their own options,” said Simon an undeniable mark in the Islamic debt departure from NASDAQ Rahimzada, a partner at King & markets (with US$49.06 billion currently Dubai of its biggest and Spalding specializing in cross- listed, 96% of Dubai’s total issuance and best-traded stock represents border acquisitions and equity the largest center for Sukuk listings in the an undeniable blow to capital markets (including IPOs world), on the equities side it has been Dubai’s equity game, and company listings). “The local arguably less successful. The exchange weakening a market already markets are sluggish (given the currently holds just nine listed stocks, thin and relatively illiquid, current circumstances), and which back in February were valued at which could have a there is a lack of liquidity around US$117 million, of which DP detrimental impact World represented the lion’s share. By on its appeal to continued on page 3

Awards Ceremonies 2020 Dubai Kuala Lumpur Monday 8th June Monday 15th June COVER STORY

Dubai’s loss is Saudi’s gain as ę rms look to move listings Continued from page 1

in a lot of places, compared to a boom in and has demonstrated that it is a liquid There are others on the cards — one other areas, such as Saudi Arabia, which market. Some entities that are themselves of which, IFN understands, could may oě er a beĴ er value on share prices. Shariah compliant may be looking at be Egypt’s Orascom Construction, We’ve deę nitely seen a surge of people whether or not to make a target they currently dual-listed on NASDAQ Dubai looking at this.” want to list, also Shariah compliant. and the Egyptian Exchange. With the Moreover, investors in Saudi Arabia will construction market in the UAE slowing This is not necessarily a new trend in often shy away from companies that are down dramatically, the ę rm is believed the region, despite actions such as the not Shariah compliant and so companies to be considering a move over to the UAE cabinet’s decision to raise foreign will often take the steps to become Kingdom to leverage the greater project ownership limits, allowing 100% foreign Shariah compliant prior to contemplating opportunities it has to oě er — and a ownership of companies in select sectors, a listing in Saudi Arabia, according to switch in listing location could also in a bid to aĴ ract IPOs following a Nabil Issa, a partner at King & Spalding, be on the cards, and Saudi continues lengthy drought over 2018–19. Many who splits time between Dubai and their to ramp up its spending (coronavirus UAE-based ę rms have chosen to list on aĜ liated Riyad oĜ ce. “There is a deę nite notwithstanding) to diversify its the London Stock Exchange — from the buzz around the issue.” economy, privatize its industries and NMC Health IPO back in 2012 to Dubai’s aĴ ract international participation. Network International which raised It has to be said that Tadawul itself US$1.4 billion in 2019. Other markets does not specię cally require listings in the region have also suě ered — to be Shariah compliant — in fact, People are according to the Kuwaiti Stock Exchange, the exchange is surprisingly agnostic. some 40 companies delisted between However, the strong preference from assessing 2012 and 2018. Saudi investors makes it highly desirable — and as a result, the vast majority of where their biggest listed ę rms make it their business to be The Saudi compliant. According to Islamicly, an activities are, in app that identię es and monitors Halal Tadawul to equity investments, as of June 2019 which geography. Tadawul held 202 stocks, of which 157 date has been a (or 77.72%) were Shariah compliant. If their activity in popular destination Another trend is for Saudi players to Saudi has increased, acquire overseas ę rms and switch their for potential relisting listings back to Saudi Arabia — and in that is triggering many of these cases, either before or as — it is much larger part of the deal, the purchaser requires interest in moving the target ę rm to reę nance its debt on a their listing over to than other markets Shariah compliant basis and bring in a Shariah board to review activities, in order Saudi — where the in the GCC and has to make its acquisition more aĴ ractive demonstrated that it from the perspective of Saudi investment. share prices might Nabil also commented that parties were be higher for them, is a liquid initially concerned that the Saudi Aramco IPO had sucked the liquidity out of the which suggests a market market but in fact its fundamentals are looking fairly robust. The latest listing, better return But the ultimate beneę ciary, at least of a local healthcare ę rm and hospital regionally, is likely to be Saudi Arabia operator called the Dr Sulaiman Al Habib for investors — and that could lead to a surge in ę rms Medical Group in February, just made seeking to switch their operations its eponymous founder a billionaire (and their ę nancing) to Islamic as it priced right at the top of its Shariah drivers structures, in order to appeal marketed range, at a rate of SAR50 “People are assessing where their to the substantial majority of (US$13.3) per share, marking biggest activities are, in which Saudi Investors who mandate robust appetite in the market geography. If their activity in Saudi has Shariah compliance. despite the ongoing geopolitical increased, that is triggering interest in and economic pressures. moving their listing over to Saudi — “The Saudi Tadawul to date has where the share prices might be higher been a popular destination for “The Sulaiman Habib’s IPO was for them, which suggests a beĴ er return potential relisting — it is heavily oversubscribed, for investors,” said Simon. much larger than other and that reassured a lot of markets in the GCC people,” agreed Simon. continued on page 4

Dubai’s loss is Saudi’s gain as ę rms look to move listings Continued from page 3

“Certain entities which are themselves Shariah compliant are seriously looking at what they need to do to change the operations of a target they may want MULTILATERAL STRATEGIC PARTNERS to list, to make them consistent with th Shariah.” 8 JUNE 2020 Ritz Carlton DIFC, Dubai

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