To ensure GCC bourses can participate in global stock markets and maintain their uniqueness, valuation of listed companies must be based on their performance, says Dr Habib Al Mulla, chairman, Dubai Financial Services Authority (DFSA).
Addressing the fourth GCC Economic Summit in Dubai, Dr Al Mulla said the overall objective of GCC bourses should be to balance investor interests and market buoyancy with an emphasis on greater transparency, strong regulatory controls and investor education. Stock market performance is supported by a number of factors like liquidity, company performance and increased and diverse investor participation. A single long-term development strategy for its bourses does not exist at present in the GCC.
“Though local markets are registering strong growth values and providing positive returns, it remains to be seen whether current valuations can be justified in the long term. Listed companies are using the strong market sentiments to access funds as traditional measures of company valuations like price/earnings ratios are high in the local market. These ratios are generally the primary drivers of company valuations at a micro economic level,” explained Dr Al Mulla.
The DFSA stipulates that banks and other financial firms in its jurisdiction are subject to controls over lending and monitors trading practices for misconduct. Listed companies are required to make proper and timely disclosures and report audited financial accounts. The DFSA supports this with internal supervisory and investigative processes and participation in broader investor education initiatives.
“Commercial issues can drive the consolidation of stock markets. By working together, GCC bourses can capitalise on growth with an increased focus,” added Dr Al Mulla.
The fourth GCC Economic summit addressed major regional and global economic issues and featured renowned economists and experts who presented their views on the challenges facing GCC economies.
