Forming a critical part of efforts to broaden investor bases in light of rising economic and geopolitical uncertainty, Fund Services Manager, Kathryn Miller highlights how banks in the United Arab Emirates (UAE) are making it more attractive for foreign investors to invest by relaxing their foreign ownership limits (FOL).
In recent years throughout the Gulf Cooperation Council (GCC) bloc there has been a necessary shift to open up their capital markets to foreign investment. As a result, economic diversification has taken centre stage, responding to unpredictable oil prices and political tensions across the Gulf region and beyond.
Perhaps the region's staunchest advocate for relaxing foreign investment laws has been the UAE, successfully boosting its non-oil economy to over 70% of national GDP. In addition to granting 100% foreign ownership across 13 industries onshore late last year, its most influential banks are now raising their FOL.
Its largest bank, First Abu Dhabi Bank PJSC has even proposed removing the FOL altogether following its share price increase that was prompted by raising limits to 40% in February. More recently in September, Dubai's largest bank, Emirates NBD PJSC raised its limits from 5% to 20% and on 2 September announced its intentions to seek shareholder approval to double it to 40% - a move that pushed its shares to a 12-year high.
Having a larger, more diverse range of investors will boost liquidity in the region's banks. It will also deepen the pool of investor expertise in the region, raising levels of transparency, corporate governance and ultimately, profitability; further professionalising the UAE's capital markets and solidifying its position as the GCC's most investor-friendly location.
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