Why and how can you invest in the UAE stock markets

The UAE is a rapidly growing hub for global finance and investment. Its dynamic economy and strategic geographic location make it an attractive destination for investors seeking opportunities in the Middle East and North Africa (Mena) region.

There are many ways one can invest in the local markets and create wealth over the years of residency here. One of the prime avenues for investment in the UAE is the stock market.

1. Direct stock investments

One of the most straightforward ways to invest in the UAE stock market is by purchasing shares of publicly-listed companies on various UAE stock exchanges. The three predominant bourses in the UAE include the Dubai Financial Market (DFM), the Abu Dhabi Securities Exchange (ADX), and Nasdaq Dubai. Investors can buy shares of companies listed on these exchanges through brokerage firms or trading platforms. Retail investors can also directly apply for initial public offerings of companies through the DFM and ADX.

A slew of listings in the last year has added depth to the local markets and also provided good returns to investors. As of October 16, Salik, for instance, is trading at more than 56 per cent from its IPO price of Dh2. The share price of Adnoc Logistics is up 72 per cent from its listing price. Adnoc Gas’ shares are trading at more than 35 per cent from its initial public offering price of Dh2.37. These are just a handful of examples of the companies that have listed on the local bourses in the last year.

What’s interesting is, investors do not need a trading platform or a brokerage firm to apply for IPOs. Retail investors can register directly with DFM and ADX and generate respective investor numbers (NIN) to apply for stocks.

However, before investing directly in stocks, it's essential to conduct thorough research on the companies you're interested in. Analyse their financials, market trends, growth prospects, and overall industry performance. Understanding the economic landscape and regulatory environment of the UAE is vital to making informed investment decisions.

2. Exchange-Traded Funds (ETFs)

Exchange-Traded Funds (ETFs) are investment funds that hold a diversified portfolio of assets, such as stocks, bonds, or commodities. ETFs are traded on stock exchanges, providing investors with exposure to a specific market or sector without having to purchase individual stocks.

In the UAE, there are ETFs that track the performance of the local, regional, and global stock markets, providing a relatively easy way to invest in a diversified portfolio of companies. Interestingly, ADX has recorded a significant increase in the value and volume of trading in ETFs since the beginning of this year, making it the most active and liquid ETF market in the Middle East and North Africa region.

In June 2023, ADX listed units of the Chimera – Standard & Poor's China Hong Kong Shariah ETF, which tracks the movement of Shariah-compliant Chinese stocks listed on the Hong Kong Stock Exchange.

In November 2023, it listed the Chimera FTSE Abu Dhabi 15 fund, which tracks the FADA 15 index. In August 2023, it listed an exchange-traded index fund that tracks the movement of Shariah-compliant stocks listed on the Istanbul Stock Exchange.

In addition to these three funds, the platform also includes a range of funds by Chimera covering sectors in the US, UK, Kuwait, Pakistan, KSA, Hong Kong, and Turkey.

ETFs offer diversification, liquidity, and relatively low management fees compared to traditional mutual funds.

Suneeti Ahuja-Kohli is an independent journalist based in Dubai, UAE. She can be reached at suneetiahujakohli@gmail.com.