DUBAI, 21 September 2005 — Minister of Economy and Planning Sheikha Lubna Al-Qassimi yesterday rejected a suggestion that the UAE economy was “overheated” and the government was following a carefully chartered strategy to promote foreign equity ownership and privatization.
Addressing a conference on the Middle East Capital Market in Dubai, Sheikha Lubna also said the Central Bank’s decision to limit the number of initial public offerings (IPOs) has benefited the market.
She dismissed fears that the UAE economy was overheated. “Through privatization and more tolerance toward non-citizen equity participation, we stand to expand and invigorate activity in the stock market,” said the minister. “The ever-changing width, depth and resilience in the stock markets attest to the dynamism of what is happening in the real market.“For policy-makers these developments are not construed as danger signs when the boom cycle bids us farewell, but as an opportunity which must be harvested...” Explaining the government strategy to regulate the market while keeping all doors open for private sector investment, she said: “The Central Bank intervention was to prevent open credit extension to potential subscribers of IPOs, it was motivated to check market over-exaggerations and misleading information. “This measure was truly preventive and well-justified.
The stock market became less erratic and less jittery but did not lose its energy. It was a win-win situation.” The government will promote foreign equity ownership and push privatization to maintain stock market growth, Sheikha Lubna said. A number of listed companies have recently raised the limit on the maximum possible foreign stake.
Sheikha Lubna also referred to an expected amendment to the companies law to allow UAE nationals to float family firms while retaining control. Current law says 55 percent must be offered for sale, discouraging many firms from entering stock markets. She did not say when the amendment would come into effect but suggested a new minimum stake figure of 25 or 30 percent. A third bourse, the Dubai International Financial Exchange (DIFX), is due to open for business this month.
Sheikha Lubna said the DIFX would be “the first step toward the globalization of Gulf stocks” and rejected criticism that high UAE stock prices would limit international interest. “Overpriced stocks will eventually have to pass the market test and be subject to healthy corrections,” she said.
There were only 32 companies listed on the UAE’s bourses in 2002, now that number has more than doubled.
