Abu Dhabi’s FAB Rises as It Seeks to Lure More Foreign Investors

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Burj Khalifa tower, UAE
The Burj Khalifa tower, center, stands among city skyscrapers and the Address Sky View, right, under construction by developers Emaar Properties PJSC, in Dubai, United Arab Emirates, on Wednesday, April 11, 2018. Transformed into a flamboyant city state from an impoverished Gulf port in less than 50 years, Dubai defied geology to build skyscrapers and elaborately shaped islands in the sea. Photographer: Christopher Pike/Bloomberg

First Abu Dhabi Bank jumped on optimism. The lender will follow regional peers and raise the foreign-ownership limit on its stock.

The shares climbed as much as 5.8 percent in Abu Dhabi before paring gains to 1.8 percent. The ADX General Index added 0.6 percent, with FAB shares adding the most to the increase. The United Arab Emirates’ biggest lender aims to raise the cap for foreign ownership to 40 percent from 25 percent, it said last week.

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Shareholders still need to approve the change at a meeting on Feb. 25. Investors from abroad held about 12 percent of FAB shares as of the end of last month, according to information on the stock exchange’s website.

Qatar National Bank last year raised the ceiling for foreigners to 49 percent from 25 percent, while Dubai-based Emirates NBD PJSC plans to quadruple the limit for foreigners to 20 percent.

Expected Inflows

The higher cap for foreigners could allow the Abu Dhabi-based lender to earn a higher representation within emerging markets benchmarks compiled by MSCI Inc. and FTSE Russell, triggering inflows of as much as $766 million, according to Mohamad Al Hajj, an equities strategist at the research arm of EFG-Hermes Holding Co. in Dubai.

Even if the percentage owned by foreigners doesn’t actually reach the expected new 40 percent limit, the change in the ceiling will still allow the re-balancing of weight in the benchmarks. If the new cap is approved by the end of this month and is fully implemented before the last 10 business days of April, Al Hajj estimates $534 million of inflows in May and $232 million in June from MSCI and FTSE passive investors, respectively.

QNB shares advanced about 66 percent since it announced the intention to increase the cap for foreigners in March 2018, even though the actual ownership by investors abroad remains around 10 percent. Emirates NBD’s holders approved an increase in limit last year, but the change hasn’t been implemented yet. The stock has advanced about 7 percent in the past year. First Abu Dhabi Bank had a weight of 0.21 percent in the MSCI Emerging Markets Index as of Jan. 31, more than any other member from the United Arab Emirates.The stock alone represents around 45 percent of the main gauge in Abu Dhabi “Judging from events so far in 2019, it seems that ADX could outperform DFM again this year,” Al Hajj wrote in a report, with First Abu Dhabi Bank set to benefit from the foreign ownership limit increase and the ADCB/UNB ongoing merger driving $190 million into the stock of the new entity. Dubai’s DFM General Index plunged 25 percent in 2018, while the Abu Dhabi gauge rose 12 percent.