Uniform trading must to evolve pan-Gulf ETF

30/05/2011 00:00 AST

The GCC (Gulf Cooperation Council) region needs uniform trading days and hours to develop a pan-Gulf exchange traded fund (ETF) in view of the growing interest for such instruments that have outpaced mutual funds globally, according to BlackRock.

“I think there is the potential to bring more products in this region but we have to make sure that the ecosystem –regulations, tax system and market making – works,” Deborah Fuhr, managing director of BlackRock, said.

Observing that the number of institutions, including family offices (in this region) using ETFs have more than tripled in the last 12 years, she said there is more than one could see because many of the investors in this region have banking relations with private banks in the UK or Switzerland.

Finding the need for a benchmark (for ETFs) in this region, Fuhr said a uniform regulation would be helpful.

“If it is possible to have a certain set of regulations in terms of (uniform) trading days and hours, then that will make it easier for creation of a GCC product,” she said in the presence of Robert Broadwell, director of BlackRock.

She said different trading days and hours hinder the development of a pan-GCC product. ETFs are mostly (but not exclusively) index-based open-ended funds that can be bought and sold as quickly and easily as ordinary shares on a stock exchange. They provide investors with the opportunity to access markets that were previously closed to them. Asked about the potential for more ETFs in the region (at present, Saudi Arabia has two ETFs and Abu Dhabi has one), Fuhr said she finds scope for creating a pan-GCC product, which largely tracks equities.

“Clearly you have institutions in this region that can handle these products,” she said, adding if there is a GCC product then it would also appeal to institutional investors.

Asked about a possible upgrade by MSCI on Qatar to “emerging market” status from the present “frontier status”, she said the net effect would be “positive” for Qatar.

“There is a lot of money tracking the MSCI index and many of the index funds will consider investing in Qatar,” she said.

A top official of Bank of New York-Mellon recently said more than $2bn from foreign funds could find their way into Qatar, should Doha’s bourse be upgraded.

Finding the increased scope for ETFs in Qatar since international investors are interested in bringing money, Broadwell said any ETF should comprise broad market sectors.

Gulf Times