MENA Regulation panel
The first panel discussion of the conference looked at Structural developments in MENA equity markets, bringing together regional regulators and operators including:
- Khaled Abdul Razzaq AlKhaled, CEO Boursa Kuwait
- Khaled A. Alhomoud, member of the Board of Commissioners, Capital Market Authority of Saudi Arabia
- Mishaal Al_Usaimi, vice chairman of the Board of Commissioners and acting chairman / managing director, Capital Market Authority of Kuwait
- Mohamed Farid, chairman of the EGX
- Obaid Al Zaabi, CEO, Securities and Commodities Authority of the UAE
- Moderated by: Julian Bruce, head of UAE Securities Brokerage at EFG Hermes
Egypt: The emphasis has to be on deepening both the supply side (more IPOs) and the demand side, with the latter to include the introduction of new financial products and instruments (short-selling and derivatives), says Farid. Egypt already has a well-rounded regulatory framework, but look for changes that will make it faster to incorporate a fund and get it listed on EGX. Further changes could involve changes to how the closing price of equities is calculate.
UAE: The country is looking to bring larger family holding companies back to the market. The country introduced a self-regulating model in 2016 and changed listing regulations to accommodate family businesses and SMEs. The SCA will continue to look at how to encourage family companies to return to the market and is pushing to roll out blockchain and a sandbox for fintech.
Kuwait: Kuwait has had a poor IPO record, with only one company listing in the last six to seven years. The country is undergoing a four-phase reform process, said Al Usaimi. Regulators there have relaxed listing restrictions by removing the 30% free float and profitability requirement, introducing a new market segmentation mechanism, which goes live in April, and through plans to list the Kuwait Bourse by 1Q2019. The bourse also saw the introduction of T+3 settlement cycle. This could result in as many as IPOs this year or next. Future reform plans include introducing margin lending and short selling.
Saudi Arabia: The country’s reform priorities include updating rules and regulations on settlement cycle, IFRS, and reclassification of sectors in the market. New developments are coming, including the introduction of derivatives. While these need plenty of work and coordination with the commercial banks and authorized financial institutions, the country plans to have it up and running by the end of 2019.
Improving investability and expanding foreign ownership: The UAE hopes to open the door for 100% foreign ownership in some sectors through a new investment law currently being drafted, said Al Zaabi. The country has a vision of opening all sectors to allow for a minimum 49% foreign ownership once boards of companies have the confidence to be more exposed to foreign capital. As for Saudi Arabia, its Vision 2030 does call for greater foreign ownership, but it is too early for the country to allow foreign ownership levels to increase above 49%, said Alhomoud.
Challenges facing the reform cycle: The biggest challenge the UAE faces in terms of developing equity markets is attracting more institutional investors. Al Zaabi sees a need to develop investor confidence as a solution to the problem. He sees brokerages as playing a major role in this. EGX boss Mohamed Farid thinks the biggest mistake the country has made when expanding its equity markets has been the focus on institutional investors over retail investors. Fintech will play a role in bridging that gap, along with improving financial literacy.