31/05/2011 00:00 AST
The Arab Federation of Exchanges (AFE) is creating two Arab indices, one of which has the potential to create exchange traded fund (ETF) as the body has proposed interconnectivity among Arab clearing houses.
“We discussed creating Arab indices, which will reflect the performance of the stock markets in the region. We may try to have two indices, one of which will be wider to cover almost all the Arab countries, and the other one will be limited to most liquid companies in order to build a trade-able ETF on that index,” AFE secretary general Fadi Khalaf told Gulf Times after the annual council meeting.
In the meeting, it was also decided that Qatar Exchange, represented by its acting chairman Hussain Ali al-Abdullah, will chair the federation for the next 12 months; taking the mantle from Sulaiman S Alshahoumy, chairman of Libyan Stock Exchange.
“We are still negotiating with Standard & Poor’s about the criteria to choose the companies and other technicalities. Things are really going forward and we hope to have an index in the next few months,” Khalaf said, adding the project was rather delayed due to the new geopolitical situations in the region.
The creation of the regional benchmark index has the potential to further strengthen the visibility and liquidity of Arab exchanges through new financial vehicles such as ETFs that would track the new regional index, according to the AFE.
Asked whether any sector-specific index was on the cards, Khalaf said some of the members had suggested creating such an index. “May be, we have to start with something and then we can widen the scope,” he added.
Seeking co-operation and partnerships among the Arab stock exchanges, al-Abdullah said joint work was an urgent need, especially in a world of strong alliances, financial crises, and unstable regional circumstances. “No individual country, or society, is immune from the vicissitudes of the global economy that render great perils,” he added.
Al-Abdullah said considering the stock exchanges as essential assets in the Arab economies calls for serious initiatives in increasing the efficiency of services in order to attract investments.
The members of the AFE are Saudi Arabia, Kuwait, Egypt, Casablanca, Bahrain, Beirut, Qatar, Tunisia, Dubai, Amman, Abu Dhabi, Muscat, Libya, Iraq, Palestine and Damascus.
Khalaf said the meeting also discussed an “exceptional” item regarding the further linking of clearing houses in the Arab region as part of facilitating movement of funds and securities. “We are now creating a link as per the international standards and technology,” he added.
At present, the central clearing houses under the AFE ambit are Kuwait Clearing Company; Misr for Clearing, Settlement and Central Depository; Custodian and Clearing Center of Financial Instruments; Securities Depository Center (Jordan); Tunisian Central Depository; Maroclear (Morocco) and Muscat Depository and Securities Registration Company.
Khalaf said the members also discussed the possibility of introducing circuit-breaker system so as to protect the market from violent gyrations accompanying geopolitical situations.
Gulf Times
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