DUBAI (Reuters) – HSBC Holding Plc said on Sunday it is setting up the first brokerage company in the United Arab Emirates managed by an international bank as foreign interest in Gulf markets grows after last year’s crash.
HSBC, which owns 49 percent of the planned company, HSBC Middle East Securities, will start offering the service to its institutional clients before the end of the year and to individual investors in the first half of next year, said Neil Foster, chairman of the brokerage.
“There is a common theme where the Middle East is increasingly valuable and important to people,” Foster told reporters in Dubai. “The fundamentals of the region are very positive.”
HSBC, which had previously traded for its clients through other companies, will offer the service for the Dubai and Abu Dhabi stock exchanges, Foster said.
While Europe’s biggest bank is interested in offering brokerage services in other Gulf Arab oil producers, it has not yet applied for any licences, Foster said.
Foreign interest in Gulf Arab stock markets has grown after last year’s crash in which four of the seven benchmarks indexes dropped more than 35 percent, sending valuations plummeting.
The main indexes of Saudi Arabia, Dubai and Abu Dhabi were the three worst performers among 82 tracked last year by U.S. stock market research Birinyi Associates Inc.
Kuwait has led a recovery this year, rising almost 28 percent. Oman is up 25 percent and Abu Dhabi, which lost 42 percent its value last year, is up 18 percent.
London-based Blakeney Management, which manages about $1.5 billion of assets in emerging markets, said last month it more than doubled its allocation to the Gulf, betting record oil prices will underpin economic and profit growth. Its biggest exposure was to Abu Dhabi, it said.
Gulf Arab governments are easing curbs on foreign capital, hoping more institutional investment will help reduce volatility in the markets, which are dominated by individual investors.
They account for as much as 90 percent of trading volumes in some Gulf markets, Foster said.
Saudi Arabia last week lifted all remaining restrictions on Gulf Arab investors in its publicly listed stocks, allowing them to trade in financial services, including banks.
Rashed al-Baloushi, acting general manager of the Abu Dhabi Securities Market until this month, told Reuters in June that several foreign banks, including HSBC, were seeking brokerage licences in the UAE.
Still, investors from outside the Gulf States — Saudi Arabia, the UAE, Kuwait, Oman, Qatar and Bahrain — are generally restricted in the percentage stakes they can own in companies.