Posted on October 22, 2015

The 55th World Federation of Exchanges (WFE) General Assembly and Annual Meeting was hosted by Qatar Exchange this week at Marsa MalazKempinski, The Pearl – Doha. Doha Bank CEO Dr. R. Seetharaman participated in the panel discussion “Opening the Middle East Markets - The Shape of Things to Come” on 21st October 2015.

Speaking at the panel discussion, Dr. Seetharaman shed light on the broad outlook for the global economy. He said, “Global economic growth has been revised down by IMF to 3.1% and 3.6% for 2015 and 2016 respectively. Advanced economies are expected to grow by 2% in 2015 and 2.2% in 2016 respectively, while emerging economies are expected to grow by 4% in 2015 and 4.5% in 2016 respectively. The decline in growth this year reflects a further slowdown in emerging markets, partially offset by a modest pickup in activity in advanced economies—particularly in the euro area. Extraordinary accommodative policies from major Central Banks of Advanced Economies since the global financial crisis have contributed to a compression of risk premiums across a range of markets including sovereign bonds and corporate credit, as well as a compression of liquidity and equity risk premiums. The policymakers should adopt strategies to deal with sudden shifts in market liquidity.”

Speaking on market reforms in the GCC, he said, “The market reforms in GCC should shape up taking into consideration both global and regional liquidity as GCC markets expect to receive inflows from both regional and global investors. Tightening of liquidity will impact inflows into the region. The enhancement of liquidity in GCC can be done through measures such as - Upgrade the GCC markets with MSCI, Develop wider instruments for regional and global investors, Encourage Short selling, Segment the capital market separately for SME sector, and Enhance corporate governance so as to provide appropriate information for global and local investors. Also, corporates should invest in investor relationships so as to have periodic communication with investors.”

Commenting on the reforms undertaken by Qatar Exchange (QE) in recent years, Dr. Seetharaman said, “QE was connected to SFTI (Secure Financial Transaction Infrastructure), a worldwide network that connects banks and brokers across the world to exchanges in Europe and the US. Qatar Exchange introduced a number of new equity indices to supplement the existing QE Index. It had initiated Treasury bill trading and trading of government bonds, and was upgraded to “emerging market status” w.e.f May 2014. Qatar Exchange is also working on SME exchange and Exchange traded fund initiatives.QE Venture Market will be dedicated to SMEs, and will be founded on strong domestic roots where issuers and investors come together at the heart of the financial community. ETFs provide investors with the ability to buy the index through a single trade on the exchange.”

Turning his attention to reforms undertaken in GCC capital markets, Dr. Seetharaman said, “The policy objectives in developing GCC capital markets will enable corporates to raise capital as well as provide a savings and investment forum for the domestic population. The opening of the Saudi market through the Qualified Foreign Institutional Investor programme will see some additional inflows from foreign investors, but the significant event to look out for would be the MSCI upgrade of the market to the Emerging Market Index.Most of the corporates in GCC follow IFRS reporting which is one of the best benchmarks for reporting; further improvements can be enhanced by Management in reporting to address the requirements of investors. The optimum mix of funding, banks vis-a-vis markets depends on the sector, the company’s strategic objectives, the nature of operations and its geographical presence.

Dubai Financial Services Authority (DFSA) has in recent years taken various steps to enhance its capital markets regime which includes code of market conduct, rulebook for exchanges and clearing houses. In UAE, the new Commercial Companies Law had relaxed the free float from 55% to 30% which will allow founders to remain the controlling shareholders of companies following a listing.In 2014, the Kuwait Capital Markets Authority (CMA) issued new rules to regulate the listing and delisting of companies on the Kuwait Stock Exchange (KSE) and listing of companies listed on the KSE on foreign stock exchanges. The GCC market reforms in the coming years should enhance liquidity and investments from global and regional investors.”