UAE capital markets partner with Hong Kong exchange

Weiye Tan/Unsplash

• HKSE adds ADX and DFM to roster
• Secondary listings for UAE companies
• Improved access to Asian liquidity

The Hong Kong Stock Exchange (HKSE) has added the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) to its roster of recognised marketplaces.

The move opens the door for UAE-based companies to pursue secondary listings on one of Asia’s premier financial markets.

It also follows the inclusion of the Saudi Exchange (Tadawul) in 2023, marking a significant step in strengthening financial ties between the Middle East and Asia. 

Saudi Arabia led the region in initial public offering proceeds in the first six months of 2024, raising over $2 billion from 19 offerings, which accounted for about 60 percent of the total Gulf IPO proceeds.

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Andrew Tarbuck, partner and head of capital markets at Al Tamimi & Co, a Dubai law firm, believes this development offers UAE-listed companies “clearer paths” to access Asian liquidity pools. 

“This is a strong indicator of the growing maturity of the UAE capital markets and its securities exchanges, and the commercial relationships between the UAE and Asia,” he told AGBI. 

“The Hong Kong Stock Exchange goes through considerable due diligence to enable a stock exchange to be added to its Recognised Stock Exchange list, so this is a strong marker as to the validity of the UAE exchanges on the global capital markets stage,” Tarbuck said.

This decade, Abu Dhabi and Dubai have part-privatised many government-owned companies, sparking an IPO flurry that runs counter to slowdowns in other regions.

Hong Kong is the eighth-largest stock exchange in the world, with an equity market capitalisation of nearly $4 trillion as of March 2024, according to Statista.

Tarbuck points to technology, infrastructure, healthcare, education and sustainable assets such as electric vehicles, as sectors likely to benefit most from this development. 

Linda Lam, head of equity advisory for North Asia at UBP, said that Saudi-listed infrastructure and energy companies could complement the Hong Kong market, which is dominated by the financial sector including banks and insurance companies and Chinese internet companies. 

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“Hong Kong’s super-connector status with mainland China allows for a deep capital market and rich pool of talent for international companies such as Gulf companies to utilise,” she said.

While US and European exchanges offer substantial opportunities, Hong Kong's strategic position as a financial centre could offer Gulf companies unique growth opportunities not readily available in Western markets, according to Vijay Valecha, CIO of Century Financial.

“A secondary listing in Hong Kong may be more attractive for Gulf companies compared to US or European exchanges given the closer economic and cultural ties with Asia, potentially relatively lesser regulatory hurdles and better access to Chinese and broader Asian markets.” 

However, dual listings come with challenges, including compliance with two sets of regulations and managing country-specific risks. 

Despite Hong Kong’s recognition of the Tadawul last year, there has been minimal activity in terms of secondary listings. 

Valecha said that strategic hesitancy among Saudi companies, the complex regulatory environment and the economic slowdown in Hong Kong could also be factors. 

“Last year's market conditions, exacerbated by issues in the real estate sector, have made companies cautious,” he said. 

“However, as conditions stabilise, we can expect increased interest from Saudi firms, enhancing capital access and fostering stronger economic ties between the Gulf and Asia.”