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Doha deal heats up competition in Gulf

DOHA - The NYSE Euronext's purchase of 25 percent of Doha stock exchange heats up the rivalry between the Gulf's growing financial centres in Qatar and the United Arab Emirates, analysts said on Wednesday.

"This deal is a reflection of the ongoing competition between bourses in the UAE and Qatar," said Fahd Iqbal, research vice president at the Dubai-based EFG-Hermes investment bank, a day after Qatar and the transatlantic financial market operator announced the 250-million-dollar deal.

"All the bourses across the Gulf Cooperation Council are vying to become the dominant market in the region," he told AFP, referring to the six members of the oil-rich bloc -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

Qatar and the UAE bourses in Dubai and Abu Dhabi have been strengthening their international presence through partnerships with big stock exchanges.

Borse Dubai and Qatar Investment Authority (QIA) hold 22-percent and 15.5-percent stakes respectively in the London Stock Exchange, while Nasdaq OMX holds a 35-percent share in Dubai International Financial Exchange (DIFX).

Abu Dhabi Securities Market in March announced a cooperation agreement with NYSE Euronext, in which the global exchange would provide infrastructure and technology for trading in derivatives and futures.

Tuesday's announcement "lays the foundations for us to build Doha into a world class financial centre," said Qatar's Prime Minister Sheikh Hamad bin Jassem bin Jabr al-Thani.

"Our country's financial markets will be an integral part of a group which links together the world's major trading centres across the US and Europe and now the Middle East," he added, underlining Qatar's ambition to become a financial services hub.

Neighbouring Dubai, which has established itself as a regional tourism and business hub, harbours similar ambitions to turn its nascent financial market into a regional centre.

"(This deal) raises the stakes in the race to become the leading financial centre of the region," wrote columnist Frank Kane in the Emirati English-language daily Emirates Business.

While local markets are keen to link up with big global names, the latter are being lured by the abundant liquidity that is fed by huge oil revenues and rapid economic growth in the region.

"We have already seen a massive increase in liquidity in many of the markets in the region. The deal allows NYSE Euronext to get a foothold in a nascent stock market with massive further growth opportunities," Iqbal said.

A foreign stock exchange buying into regional markets "gets to be a partner of choice, and gets to benefit from the increase in liquidity," he explained.

Qatari financial analyst Nasser al-Shafi agreed that "high oil prices and the wealth building in the Gulf have attracted attention to Gulf markets."

"As Gulf countries try to diversify their revenues through investing their huge liquidity abroad, foreign (investors) are also looking for safe places to invest," said Amjad al-Rashaq, a stock broking manager in Doha.

Qatar sits on 15 percent of global proven gas reserves, the third largest in the world.

Kane said from Qatar's viewpoint, the "rationale behind the Doha deal is similar" to that of Abu Dhabi's, which is to establish a strong centre for trading in derivatives.

"For that, the underlying technology should be in place along with access to foreign investors - who currently have the strongest demand and appetite for such products," said Iqbal.

He said that the Gulf markets "need to raise regulatory foreign ownership limits and, in addition, encourage their listed companies to follow suit."

Doha stock market limits foreign ownership to 25 percent for most of its companies, while non-Arab investors in the UAE have access to about 30 percent of listed equity, Iqbal said.

"We see a strong likelihood of foreign ownership limits being raised in many of the stock markets," he said.