Investors’ choice widens with Nasdaq Dubai’s futures contract
By Siddesh Suresh Mayenkar Senior Reporter
Dubai: Investors trading on Dubai stocks like Emaar Properties and Dubai Islamic Bank will have one more instrument to safeguard themselves of adverse market movements.
Nasdaq Dubai is slated to launch futures contract in 10 stocks from September 1, it said on its website.
“This provides a unique opportunity to international and regional investors to profit from market movements and hedge their positions,” Nasdaq Dubai said.To start with, the bourse will offer futures contract in Dubai Parks and Resorts, Aldar Properties, Emaar Properties, Damac Properties, etisalat, DP World, FGB, Union Properties, Arabtec and Dubai Islamic Bank. “In due course,” the bourse plans to expand to include other derivatives products, including futures on shares listed on Mena and international markets as well as options.
This would widen the choice for investors who just depend on cash market as of now.“This is an excellent initiative. Hopefully this would kick start the development of the derivatives market, and it could potentially overtake the cash market over time. Investors would be able to go long or short a security much more efficiently than through the cash market,” Jaap Meijer, managing director at Arqaam Capital told Gulf News over the phone.
This is also expected to spur liquidity in a market, which has been riding high on the MSCI upgrade in 2014, that attracted $1.2 billion (Dh4.4 billion) in capital flows.
“This would spur liquidity in the underlying assets as well, the next step should be having the call options and put options, and those could be very popular instruments among retail investors,” Meijer said.
Sanyalaksna Manibhandu, director Research, National Bank of Abu Dhabi Securities also agreed.
“It’s a positive step. It’s a new instrument. People at the start would experiment and through that they’ll push up the price and traded value as you would be able to protect yourself on the upside or downside,” Manibhandu said.
For brokerages as well, this would mean improved business.
“As a brokerage house, it would a new revenue line, stream for us. So it would help us generate more revenues in terms of business and attract new segment of clients,” Menacorp’s Al Rantisi said.
A few more years
“It’s more of a chicken and the egg situation. When the volumes and open interest starts to increase, the popularity of the new products should accelerate, but it will take a few years to get there, at least,” Meijer said.
While the volumes might only look up, industry participants expect the regulator to work on expanding the depth of the market. The regulator must try to get more primary listings on the exchange.
“In terms of development of the market, we need to do work across the board. We need to have a broadening of market here. Dubai and Abu Dhabi are not represented in terms of all the industries, and have over-representation in terms of banks and property developers and some banks don’t have liquidity,” Manibhandu said..
UAE markets should try to replicate the Saudi Arabia model, which has a broad representation of companies like banks, property, and industrials.
Dubai has 15 companies which are liquid, and Abu Dhabi has another 15 stocks. “The market should encourage companies to list on the exchange and offer benefits. Most businesses who want to raise money, do it through banks, and the government should incentivise to list their companies here,” Nabil Al Rantisi, managing director-brokerage at Menacorp said.