The early summer torpor of the Dubai Financial Market (DFM) was lifted in early July when trading began in a groundbreaking bond arranged by the leading local banks for Emirates Airlines. Bankers hope that, at long last, this will provide the impetus for a genuine debt and equity capital market in the United Arab Emirates.
Some banks expect more bonds to be issued later in the year and one local investment company is planning an Arab fixed-income fund. There is growing confidence in Abu Dhabi and Dubai that investors from the Arab world, having been badly burnt in the sharp downturn on Nasdaq and other western markets, are now looking to place their money locally.
This will be a lengthy process, as most local bankers appreciate. The UAE is no different to other Gulf markets. Its capital markets need to be more transparent, less volatile and prepared to accept foreign investors in many more companies. The three UAE stock exchanges need to be consolidated into one market with single pricing. Regular share trading needs to become the rule rather than the exception.
The markets will only get real breadth when the UAE's large merchant families start to consider the advantages of floating their companies and the UAE and individual emirate governments begin to take privatization more seriously.