Interpreting Middle East Economic News and Analyzing Market Trends

Dubai’s first IPO in over four years has no trades, but Al-Hilal Bank’s latest sukuk issue was 12 times oversubscribed

 

BLME-hits-Nasdaq-Dubai

Source: Amilin TV

 

Bank of London & the Middle East, also known as BLME, listed its shares on Nasdaq Dubai, the Emirate’s second exchange, on October 8th, but had no trading on its first day.  BLME is a six-year old Islamic bank based in London.  This marks Dubai’s first IPO in over four years.  Nasdaq Dubai is the smaller of the two exchanges in the Emirate.  The Dubai Financial Market (DFM) is the primary exchange, which has lately seen its highest trading activity since the financial crisis.  The DFM is up nearly 70% year-to-date on a lot of euphoria, which has spread across all sectors in the UAE, especially real estate and Islamic finance.  The latest sukuk issue to hit the market was 12-times oversubscribed… so what happened to this IPO?

 

 

Dubai listed its first new stock in more than four years on Tuesday but the shares drew no trade, underlining the limits of the market’s recovery from its 2008 crash.

Bank of London and The Middle East (BLME), Britain’s largest stand-alone Islamic bank, was listed on Nasdaq Dubai, the smaller of the emirate’s two stock exchanges.

The bank said its choice of Dubai showed its commitment to expanding its business in the Middle East. Earlier this year, Dubai announced plans to become a top centre for Islamic finance.

But the stock did not trade on its first day, apparently because the size of the share float was modest and investors were not yet familiar with the bank. The Nasdaq Dubai website showed 100,000 shares in BLME offered at $2.20 each, below its price at listing of $2.61, but no takers.

… big equity listings, including IPOs on Dubai’s main exchange Dubai Financial Market, have not yet resumed. Some fund managers blame awkward listing rules which limit owners’ options in structuring share offers.

Also, many of Dubai’s blue chips are controlled by the government, which owns large stakes in them. Investors would love to see IPOs from firms such as the fast-growing Emirates airline and Dubai Electricity and Water Authority, but that would depend on a political decision.

Read the full story from Gulf Business.

 

Yes, investors in the UAE prefer large blue-chips with significant government stakes, but who is to BLaME for BLME’s fizzle of an IPO?  Nasdaq Dubai is a very small exchange with only a few companies actively trading and only DP World trading with any significant volume.  According to Nasdaq Dubai’s website, there are currently 8 equities, 12 sukuk, 7 bonds and 2 funds listed on the exchange.  Why would BLME choose Nasdaq Dubai?  For its part, Nasdaq Dubai didn’t do its job properly either.  If investor were not familiar with the new listing, shouldn’t this have been one of the primary issues to address before an IPO, especially since it’s the first one in over 4 years?  Both the choice of exchange and the execution were handled poorly. 

 

On a positive note, Nasdaq Dubai seems to have found a niche in sukuk trading.  The latest $500 million sukuk issue by Abu Dhabi-based Al-Hilal Bank was extremely successful.  The exchange, however, doesn’t seem willing to give up on equities just yet.  Just Falafel, a fast-food falafel chain has plans of listing on Nasdaq Dubai soon.  Let’s hope this time Nasdaq Dubai does its job properly.