Dubai targeting Chinese securities
US-China tariff war benefits Gulf
The Dubai International Financial Centre is stepping up efforts to attract Chinese securities firms and corporates hoping to raise funds through initial public offerings, positioning itself as an alternative jurisdiction to Hong Kong and New York.
Set up in 2004, the DIFC provides a platform for financial institutions with a legal and regulatory framework that is independent of the rest of the UAE, and primarily based on English common law with its own regulatory body and courts.
It hosts more than 400 wealth and assessment management companies including 75 hedge funds, 48 of which manage assets of more than $1 billion.
“Some of those Chinese firms are looking to raise financing and looking for offshore IPOs,” Ahmed Al Aulaqi, DIFC head of banks and capital markets said at The Capital Market Summit in Dubai this week.
“For them, offshore IPOs are limited to the Hong Kong Stock Exchange and the US Stock Exchange; there is a huge opportunity for the region to come and intercept, and bring those IPOs to be listed here in the local markets.”
The US and China – the world’s two biggest economies – are locked in a US-triggered tariff battle that is reordering the global trading order. With trade and investment links to both, the Gulf countries are treading carefully as they seek to expand their economies beyond hydrocarbons, including into finance.
The US Holding Foreign Companies Accountable Act, signed under President Donald Trump in 2020, requires Chinese companies listed in the US to comply with audit inspections or face delisting. That may generate an opportunity for Dubai.
At the same time, Beijing has tightened outbound listing approvals since 2021.
The DIFC, home to the top five Chinese banks and which contribute more than 30 percent of total assets in DIFC’s banking and capital markets sector, is now targeting Chinese securities firms that are following their corporate clients into the region.
“They want to have access to the regional stock markets,” Al Aulaqi said. “They want to bring their retail clients and institutional clients to have exposure to the region.”
More Chinese companies are expected to come to Dubai, working in sectors including electric vehicles, technology and other types of manufacturing, he said.
“We are going to see in the months and years to come more of the Chinese corporates locating and relocating in some of the free zones and the [UAE] mainland and some clusters [in Dubai],” Al Aulaqi said.
Nasdaq Dubai, the international financial exchange based in the DIFC, has in the nearly two decades since its creation to November last year attracted $22 billion in Chinese debt listings.
These include “green” bonds, where the funds are used for renewable energy, seawater desalination, clean energy and transportation projects in the UAE and the wider Gulf region.
“If we are able to successfully bring Chinese equities to the region… I think this would be a game changer,” Al Aulaqi said.
DIFC’s pitch to the Chinese is bolstered by an influx of wealthy individuals to income-tax free UAE.
The UAE now hosts almost 130,000 millionaires, 70 percent of whom live in Dubai.
Up to 8,000 more are expected to relocate to the country this year, more than to any other country in the world.
“Their liquidity would not just be listed at private banks or real estate; inevitably, a portion of it would go to the stock market and will fuel the transactions in the stock markets,” Al Aulaqi said.
