Abu Dhabi’s stock market will receive a much needed liquidity boost if foreigners are allowed to own shares in etisalat, analysts said on Thursday.
Amid conflicting reports over whether the UAE’s largest telco is set to undergo a transformation of its corporate structure, industry experts believe institutional investors would be very interested in acquiring etisalat’s stock.
Arabic newspaper Emarat Al Youm reported a new law governing etisalat may be amended to allow overseas investment in the telco. But etisalat - in a statement to the Abu Dhabi Securities Exchange (ADX) - said it was unaware of any new legislation.
“In reference to the media news about the potential change in the corporate structure of etisalat from a corporation to a public company and thereby allowing foreign and institutional investors to invest in etisalat stock; we would like to confirm that such a decision is ultimately a federal government decision, which we are currently not aware of,” the etisalat statement said.
The UAE’s capital markets scene has struggled in recent years amid dwindling volumes and a lacklustre IPO scene. Furthermore, etisalat’s situation has been a contentious issue for years with only UAE nationals allowed to hold the company’s stock.
“If this law comes into effect, it will give a boost to liquidity for sure. etisalat is a stock with a large market cap - comprising around 27 per cent of the ADX - so it is a significant component and an increase in liquidity can only be positive news,” said Saleem Khokkar, head of equities at National Bank of Abu Dhabi’s asset management group.
“Institutional investors would be the most interested in any such development as they will look at the stock as a long-term opportunity - it will be a bit more tricky for retail investors to get involved.
“It is difficult to say whether we would see a substantial increase in liquidity; it will depend on the macro-economic environment. Liquidity may not jump much initially but it would definitely improve,” he added.
Emarat Al Youm reported the Emirates Investment Authority had issued a decision to accelerate the completion of the draft law.
“I think it would be positive if this draft law goes through; investors in the UAE market have been asking about this development for quite a few years. I would be a bit sceptical [about the law’s implementation] because it has been dropped several times before for various different reasons,” said Omar Maher, an equity research analyst at Egyptian investment bank EFG-Hermes.
“If etisalat did open up to foreign ownership, it would potentially lead to a surge in liquidity. It is a very big name and could be added to regional MSCI indices due to its market cap. Most of etisalat’s value comes from its UAE operations, which have been coming under pressure. The company’s stock has been punished because of its associated risks and the wider ADX is probably the cheapest [market]in the Mena region,” he added.