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Aramex Gets Approval to Change Ownership Rules

DUBAI - Dubai-based logistics company Aramex soared nearly 15 per cent on Thursday after regulators gave it the go-ahead to modify its ownership rules, setting a possible precedent for companies eager to attract more foreign investors.

Aramex’s shares, which are listed at the Dubai Financial Market, surged to their best finish in eight months, ending at Dh1.39.

Under existing UAE law, a minimum of 51 per cent of a company’s shares must normally be owned by UAE citizens, though companies can ask regulators to reclassify citizens of other Gulf Co-operation Council member nations as UAE nationals. Aramex asked for and received an amendment from the Ministry of Economy and the Emirates Securities and Commodities Authority enabling shareholders from the GCC to be considered as locals rather than foreigners.

“Aramex may be setting a trend here. This means foreigners from London or New York and other investors that see solid fundamentals in other companies here may be interested in buying shares,” said Richard Frost, head of foreign institutional sales at Al-Futtaim HC Securities. He said that Aramex’s move could encourage companies seeking to boost their shares in the near-term to follow its lead.

If Aramex’s shares do sustain their gains as a result of this rule change, it could start a trend as a “natural progression” in emerging markets, said Haissam Arabi, chief executive officer and fund manager of Gulfmena Alternative Investments.

Analysts were reluctant to suggest which UAE-listed companies, if any, might be next to try to loosen their limits on foreign shareholders. “I think one of the main disadvantages that most Arab and GCC markets have still is that foreign investor ownership, if it exists, is below 50 per cent,” Arabi said.

He argued that governments should go further in relaxing ownership quotas. “Companies should open up to foreigners as well as GCC. I also think that company laws should change to allow foreign ownerships over 50 per cent. And governments should start pushing for such reforms if they want to truly comply with WTO (World Trade Organization) and aspire to become emerging markets in the truest sense.”

Other developed markets have grown in part by easing up their limits on foreign shareholders, he added. “For anyone who thinks this is illogical, I ask them: How did Asian economies grow and develop and become emerging markets if it wasn’t for foreign direct investments and lifting (of) foreign restrictions? Sure, sometimes that will open the door for hot money, but over the long run, see where Asia is today and where we are.”

Matthew Wakeman, managing director of cash-and-equity-linked trading at EFG-Hermes, said that current foreign ownership in the UAE is low compared to levels seen over the last few years.

“This is a nice problem for a company to have in current times, but isn’t one that is widespread in the market in the moment. Right now, investors that have fled the markets last year are not coming back in full swing. That could change very quickly though when recovery happens.” 


rocel@khaleejtimes.com