CAIRO, 7 March 2005 — It is only a matter of a few weeks before the long-awaited United Arab Stock Exchange (UASE), expected to draw more regional and foreign investors, kicks off in the populous city of Cairo.

The six-nation pan-Arab bourse, which will be based in Cairo’s Smart Village and is scheduled to begin trading in the second quarter of this year, will lead to greater Arabic economic integration and enhance capital flows into the country. The annual value of transactions is expected to be approximately $400 million at first, growing to $2 billion by the fifth year. The size of the market capital is projected to reach $2 billion during the first year and $10 billion during the first five years of the project.

The exchange will feature listings from Kuwait, Jordan, Tunisia, Lebanon, Oman and Cairo and Alexandria Stock Exchanges (CASE) and will include some 10-15 initial listings from each country. “The Arab exchange will be the core of an Arab economic union and will boost the competitiveness of the various Arab economies involved in this project,” said CASE Chairman Mohamed Abdel Salam. “It will help creating a more diverse, general Arab economy,” Abdel Salam told Arab News.

The idea of a unified Arab exchange was first proposed by the Union of Arab Bourses, which envisioned a total market fusion, with locally listed stocks transferred to a single regional exchange, in order to attract more investors. This will enhance the performance of Arab bourses that are small by international standards, the total capitalization on all Arab exchanges is equal to less than 2 percent of that of the United States.

Some experts, however, believe that the success of UASE is too good to be true as some of the participant countries would not sacrifice their dominion over their respective stock exchanges. “It will be hard for some countries, like Egypt that had an impressive boom in the past couple of years, to sacrifice their own stock exchange for just having a common Arab bourse,” said Sameh Al-Turgoman, former chairman of CASE. “They will be accepting diverting the attention from their bourses to another huge stock market, or in other words they will be creating their own rival.”

Most Arab countries, with the exception of Egypt, Jordan, Tunisia, Algeria and Morocco, have restriction on foreign participation, which limit the success of the UASE. Saudi Arabia, for instance, only allows Gulf Cooperation Council nationals to own a limited number of shares and in a limited number of companies, which hinder potential foreign investors from being listed on its bourse.

But according to CASE Deputy Chairman and former senior foreign trade official Maged Shawqi that idea will be more than just merging different stock markets. “We will have a unified exchange that will function as a trading platform without restrictions on foreign participation,” said Shawqi. “There will be cross-listing that will give companies a wider exposure and the trading will be done in either the euro or dollar,” he explained.

According to Mahmoud Abdel Qader, a spokesperson for Egypt’s Capital Market Authority (CMA), the USAE will also expose companies to more investors and will help them invading an alternative market for trading. “There is no doubt we will face difficulties at the beginning, but we will over come these problems because we depend on very efficient mechanisms not just a dream of Arab unity,” Abdel Qader stressed.

While Egypt was chosen for its accessible location in the region, the country will be also responsible for the clearance system. The task was given to Egypt’s Misr for Clearing Settlement & Central Depository (MCSD), while HSBC Bank will manage settlement operations. The Union of Arab Bourses will manage the exchange’s legal and regulatory structure.

Meanwhile, some Egyptian firms told Arab News that the Egyptian stock markets will manage to face the challenge created by the launch of the UASE. They added that the CASE, which is now performing in the top five worldwide, have witnessed a 80 percent growth in 2004, a sign of its strong policies.