One year after the UAE won the right to host World Expo 2020, leading banks and financial institutions say the financial services industry in the country has already started reaping the benefits of this mega event.
Home to nearly one-third of the GCC’s banking assets, the UAE’s banking industry is the biggest in the region. Dubai is one of the country’s two financial centres, and through its vibrant onshore and offshore markets, the Emirate has established itself as an integral component of the global financial services sphere.
When it comes to the financial sector of the country, Expo can contribute a huge amount to the country’s economy. The Expo 2020 indeed is a massive event not only for the UAE but also for the whole world. Over 133 countries are going to be part of this event and more than 25 million visitors from different countries will be part of this Expo. This event will bring opportunities and challenges both together in parallel levels. Real Estate, Tourism, Hospitality, Finance, Banking and Insurance sectors will be heavily impacted by the Expo 2020.
Dubai Financial Market
There are three stock exchanges in the UAE out of the Dubai financial market plays a significant role. DFM started its operations in the year 2000 as a government sector company, and in 2006, it had initiated its first initial public offering (IPO). More than 60 companies have already enlisted in DFM and each year a handful of new listings being added. The majority of listed companies of DFM is UAE based, and only a few stocks are from other gulf countries, for example, Arab Insurance Group from Bahrain, Agility Logistics from Kuwait).
Up to 49% of foreign investment is allowed to own up in DFM. Although it depends on the company shares, some companies are even allowing people to hold more percentage of foreign investment, and some company doesn't allow for trading. Out of the three stock exchange services in the UAE, most of the companies listed in DFM and ADSM. The regulating authority for the listed companies in the Emirates Securities and Commodities Authority (ESCA)
Real Estate, Financial and Investment, Banking, Insurance Services, Transportation, Consumer Staples, Services, and Telecommunication are nine sectors of Dubai Financial Market. Out of these sectors, Only three sectors that have been taken for the focus a centre for analysis are Banking, Financial and Investment Services, and Insurance.
How will Dubai Expo 2020 Benefit Banking Sector?
It is said that the projects related to Expo 2020 are expected to boost demand for loan. According to different estimates, Expo related infrastructure projects require about Dh 30 billion in funding. With many projects already on the verge to be completed, the Government-Related Entities (GREs) and private sector companies that execute these projects are expected to tap both the debt capital market and bank market for funding.
Experts say the Expo is likely to have a number of secondary and indirect effects to the financial advisory services, in addition to the direct opportunities to advise on the capital for projects to build new infrastructure. Private-sector credit growth in the UAE is expected to accelerate between 2014 and 2020. Analysts say apart from the Expo related credit demand both consumption and investment demand will drive the credit growth with larger credit demand coming from the corporate sector.
Effect of Expo 2020 on Stock Markets
Dubai stocks touched a new high in five years, after announcing the news that Dubai won the bid to host world expo 2020 on October 20, 2020. According to the results of the survey conducted by the CFA Society Emirates, only 56% of the litigants revealed that there might be a positive impact on DFM stock prices due to Expo 2020. The history of Expos shows the same. The study found that Expo 2020 does have a significant impact on stock market prices of three sectors. Depending on the significance of event and news, the reaction, the price of the stock exchange may vary. Out of the three sectors of study, i.e. Banking, Investment and Insurance, Capital Adequacy Ratio(CAR) for the Banking sector before and after the event is convincing than the other two. The banking sector continuously is raising its stake before and after the announcement of the event and even after. The growth of this sector very constant and shows an upward trend. This is the best sector under the finance category of DFM, to make the Investment by investors and potential investors who want to invest.
After the Banking sector, it is the Investment Sector, which has the highest CAR. Although there are many ups and downs in this, Investment is one area, which plays an important role at the time organizing these kinds of mega-fairs like Expo. So, this is also one of the right choices for the investment decision.
How can Xcellence help you?
Based on the above results, it can be advised to the investors and potential investors of UAE, i.e. the next five years, the best industry out of three sectors is Banking and Investment. It is obvious immediately after any mega-event, the organized country economy will slow down. These effects can be seen even on stock prices, and share markets so it is advised not to wait and lock with their investment in a particular sector for quite a long period of time. We at Xcellence provide every kind of assistance to the business investors who want to incorporate their business in the UAE. Contact us to know about our services.