The UAE market could suffer if the Gulf state restricts initial public offerings, a senior investment banker said.
The government has pledged to overhaul capital markets rules in response to criticism from the industry. Bankers say that informally they have been asked to keep IPOs on hold until laws are changed, which is expected late this year or early 2006.
While bankers welcome the reforms, they are concerned the delay could hurt the market, which they say is in need of new listings to soak up liquidity. Dubai's main share index on which only 27 shares are listed, has almost trebled in 2005. Current UAE guidelines, which require companies to sell at least 55 percent of their shares in an IPO, have deterred some firms from listing as owners do not want to lose majority control.
Another guideline, in which the Ministry of Economy and Planning has to approve a company's valuation, has also discouraged firms from listing. Some firms that have listed, did so at conservative valuations, contributing to massive oversubscriptions. April's 495 million dirham ($135 million) IPO of Aabaar Petroleum Investments Co was 800 times oversubscribed.
Shuaa, one of the most actively traded stocks on the Dubai bourse, was co-lead manager for Petrofac, an oil and gas services company, and Arab International Logistics.