Nasdaq Dubai plans to start futures trading on the MSCI United Arab Emirates equity index next month. This opens a new route for investors to gain exposure to the performance of UAE leading companies, as well as new hedging tools to take long and short positions.
The companies included in the MSCI benchmark, on which futures will be offered, are some of the UAE largest businesses in sectors including petrochemicals, real estate, banking, and transport. The list includes big names such as DP World, Emaar Properties, and First Abu Dhabi Bank, the exchange said in a statement. Trading will begin on January 15, 2019.
As an expanding and liquid exchange with a broad international investor base, Nasdaq Dubai provides attractive opportunities to make markets in a variety of securities. The market currently consists of single stock futures on contracts of 17 leading UAE-listed companies. The exchange plans to increase its range of equities including listing further initial public offerings (IPOs).
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Hedge and Leverage Opportunities
With the exception of Kuwait, Gulf Arab stock markets have been slow to introduce futures and options. As a result, some have asked investment banks to design over-the-counter options for individual stocks.
Nasdaq Dubai originally launched equity derivatives in 2008, but this coincided with the global financial crisis, and trading failed to gain critical mass. Activity petered out after 2011. In May 2014, however, international index compiler MSCI upgraded the UAE to emerging market status, attracting a new inflow of foreign capital.
Commenting on the news, Hamed Ali, CEO of Nasdaq Dubai, said: “Launching contracts on MSCI’s UAE equity index is an important step in the rapid expansion of Nasdaq Dubai’s equity derivatives market. It will encourage further participation from international and regional funds and other investors, including individuals, who are looking for new and attractive opportunities to increase their exposure to the UAE’s investment landscape.”