The wave of initial public offerings sweeping the country will gather pace in the latter half of this year with the IPO market touching Dh40 billion by then, a report from the National Bank of Abu Dhabi said.
But tighter regulations, including legislations, are required to support the market and send out the right signals to foreign investors, it added.
"We are expecting that the IPO market will exceed Dh40 billion during 2005 compared to Dh2.5 billion in 2004," said the latest UAE stock report from NBAD Capital Markets.
According to the report, carried by Gulf News, The IPO market is very important in stabilising the market to absorb excess liquidity and to reduce the possibility of additional liquidity pumping into the secondary markets which might create over-valuation for certain stocks." In addition to the stock market authority, the bourses in Dubai and Abu Dhabi are doing their best to regulate the market and respond to the changes.
"But there is a need for greater concentration on the regulatory side, more legislation to support and protect the fast growth and at the same time to send out a positive message to foreign investors eyeing the UAE market," the report stated.
The UAE stock market is currently ranked second after Saudi Arabia in the GCC and the Arab world in terms of trading value.
"The steady growth in the UAE markets is attracting many GCC investors wanting to diversify their investments into stocks. Many international brokerages are also planning to open branches in the UAE," the report said.
From Dh1.38 billion in 2000, the total traded value of stocks in the UAE now has jumped to a phenomenal Dh67 billion last year. By the end of June this year, it reached Dh215.27 billion with the market capitalisation surging to over Dh764.5 billion.
The NBAD Index has increased during the first half of this year by 108.75 per cent (from 8482.04 to 17706.62 points).
"These figures make the UAE stock markets one of the highest growth markets in the world," the report said.
High oil prices have filled the coffers of the Arab countries generating vast liquidity and fuelling demand for stocks.
Moreover, the economies are in growth mode, with the gross domestic product (GDP) of most in the region projected to rise.
"Economic growth is definitely a factor. In fact the surge in the indices across the region is testimony to the stock fever sweeping across the region.
"Look how the NBAD or Shuaa Capital indices have soared," said Wadha Al Taha, Research Manager for NBAD Capital Markets.
