Regional market for tech stocks set for next year

Bahrain, Jordan and Dubai plan a joint market for tech companies modelled on the Nasdaq. They hope that it will give under-financed regional technology companies access to much needed funds.

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By  David Ingham Published  July 5, 2001

Access to funds|~||~||~|Bahrain, Jordan and Dubai are working together to create a single online stock exchange for tech-focused companies in the Middle East.

The ‘NASDAQ of the Middle East’ should be online “sometime next year,” according to Jassim Karim Salman, IT head, Bahrain Stock Exchange, and project leader for IT integration of the new exchange. While the initiative is being driven by Dubai, Jordan and Bahrain, companies from across the Arab world will be invited to list on the exchange.

With at least 12 months until the launch, details are still scarce on how the exchange will operate. Salman hinted that the entire market would be online via a portal supported by financial information and brokerage services for listed companies.

Providing brokers and private investors with a full service is essential, argues Salman, in order to attract investment. “What is happening at the moment is that we are losing a lot of investment money from the Middle East to the US and Europe,” he says. “The reason for this is that [an investor] can get every bit of detail about a company online; they can open a trading account online; they can do all the buying and selling online in a secure environment. There is a lot of flight of capital not just because of the stocks, but because the [international] portals are offering a huge amount of information online and in real time. This gives people confidence in making decisions,” he adds.

A brand new exchange and supporting portal for listing tech-focused small cap players in the Middle East could break through existing barriers to successful local stock markets. The new exchange, for example, will have its own set of regulations that adhere to international standards and are not constrained by the existing legal frameworks of Middle East countries.

“You can’t really hope to attract foreign investment if you give people a set of rules that are alien to them. People are used to regulations like those laid down by the SEC,” explains Salman.
||**||Idea could be a winner|~||~||~|
The constraints on the region’s smaller IT companies are considerable, and their problems aren’t just about cash. In Jordan, for example, the legal system makes it difficult for any company to list on the stock market. As things stand now, a company has to show several consecutive years of profitability before it can go public.

“That limits companies being able to access the capital market,” explains Karim Kawar, chairman of Int@j, Jordan’s national information technology association. Intaj has been working with the Jordanian government to amend the laws, which would allow companies easier access to capital and would give investors more incentive to risk their money.

Elisabeth Jackson-Moore, Middle East managing director, Moody’s Investor Services, welcomes the announcement. “It’s always good to hear of steps being taken to promote the development of the capital markets in the region,” says Jackson-Moore.

“If it really is an online market supported by high quality financial information and brokerage research, it could be a winner. Probably, in a year’s time, the current disillusionment with this sector will have disappeared and hopefully will have been replaced with new optimism, realistic appraisals and pricings! However, there will need to be a number of companies listed with sufficient float to allow this to happen,” she adds.
If it succeeds, the market could give smaller tech-focused companies access to international capital in a way that has never been possible before. “This is an attempt to give the local IT industry an identity of its own. It is our bid to give the public the opportunity to show their confidence in the regional IT players; to inject capital in them to enable them to compete and establish a presence in the global market,” concludes Salman.||**||

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