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THE ARAB MONETARY FUND ISSUES THE FIRST ISSUE OF THE "ARAB FINANCIAL MARKET MONTHLY BULLETIN"
The composite Arab Monetary Fund index of Arab capital markets ends July trading, up 0.6 percent
The performance indicators of seven Arab stock exchanges improved with the support of higher share prices in sectors that have increased in importance following the Corona pandemic, including the sectors of technology, health care, basic materials, telecommunications and industry.
Five Arab stock exchanges record gains in market value during the month of July led by Abu Dhabi Stock Exchange with a rise of 31 percent, benefiting from the completion of the merger deal in the energy sector and the rise in telecom shares
The first issue of the bulletin monitors international and Arab experiences in establishing specialized exchanges for small and medium enterprises and stresses their importance in facilitating these enterprises' access to the financing required for expansion and growth.
As part of its efforts to develop the financial sector in Arab countries, the Arab Monetary Fund issued the first issue of the "Monthly Bulletin of Arab Capital Markets". This bulletin is concerned with monitoring the most important developments in the Arab capital markets based on the database of the Arab Monetary Fund for Arab Capital Markets, and the data issued by the Arab stock exchanges. The first issue of the bulletin indicated that the composite Arab Monetary Fund index for Arab financial markets ended trading in the month of July 2020, up by 0.6 per cent, equivalent to 2.52 points compared to the closing of the index at the end of June, bringing the composite index from 407.61 points at the end of June to 410.13 points by the end of The month of July, amid a variation in the performance of Arab capital markets indicators during the month.
In terms of performance indicators for Arab stock exchanges, seven Arab stock exchanges witnessed an improvement in their performance indicators at the end of the July 2020 closure, compared to the closing of these indicators in June, which reflects the tendency of Arab governments to gradually lift restrictions on the practice of economic activities, and with the support of the recovery of some economic sectors The sectors that have increased in importance following the Corona pandemic include, in particular, the sectors of technology, basic materials, health care, industry, consumer goods, and telecommunications. Some Arab stock exchanges have also benefited from the activity of foreign investors in these markets.
The Qatar Exchange topped the gains recorded in the performance indicators for the month of July, as the market index increased by 4.11% to reach 9368.17 points, benefiting from the activity of a number of sectors during the month, including the telecommunications sector. The index of the Iraq Stock Exchange also increased by nearly 4 per cent, benefiting from the resumption of the market for trading activity following the suspension of trading due to the Corona virus pandemic. The Saudi market index also recorded an increase of 3.3 per cent, reflecting the improvement in the performance of most sectors listed in the market during the month of July, led by the technology, health care, basic materials and banks sectors, while the performance of shares listed in the media sector declined.
On the other hand, the performance indicators of seven Arab stock exchanges recorded a decline during the month of July, led by the Kuwait Stock Exchange, whose index fell by 3.42 per cent to 5415.27 points at the end of the month of July's closing compared to 5607.07 points at the end of the June closing, where the index witnessed a decline during the first three weeks From the month of July as a result of the decline in shares listed in the banking, real estate, insurance and financial services sectors, while the sectors of consumer services, basic materials and industry witnessed improvement, while the index returned to the upward trend during the transactions of the last week of July.
The market value of the securities listed in the Arab capital markets registered improvement in five Arab stock exchanges, while it witnessed a decline in six other Arab stock exchanges. The Abu Dhabi Securities Exchange came at the forefront of Arab stock exchanges, which witnessed an increase in the market value at the end of July transactions, where the market value of the listed shares increased by nearly 31 percent to reach 646.5 billion dirhams at the end of July 2020 compared to 494.6 billion dirhams at the end of transactions last June .
The rise came on the back of TAQA’s rise of 94.16 per cent, driven by the company’s merger with Abu Dhabi Energy Corporation, adding about 100 billion dirhams to the market value. Part of the gain in the market value is also attributed to the rise in shares of other energy companies, as Dana Gas increased by 12.3% and ADNOC Distribution by 5.7%. On the other hand, Etisalat share Which exports the most traded companies in the market - especially with the announcement of the company's dividends - from gains in the market value of the Abu Dhabi Stock Exchange. The Muscat and Qatar stock exchanges also recorded increases of 5.3 percent during the month of July, benefiting from the good performance of a number of sectors listed during the month.
While six Arab stock markets recorded a decline in the market value, led by the Kuwait Stock Exchange, where the market value decreased by 3.4 per cent during July 2020 to reach 20.6 billion dinars, compared to 21.3 billion dinars at the end of June transactions, reflecting the decline of shares listed in a number of sectors Listed on the market.
The issue of the first issue of the monthly bulletin of Arab capital markets touched on the specialized stock exchanges of small and medium enterprises, indicating that small and medium enterprises play a big role in increasing the levels of output and employment in many Arab countries, as they contribute about 45 percent of the gross domestic product, and about a third of job opportunities In the formal sector, it also represented more than 90 percent of all facilities operating in the formal sector in a large number of Arab countries. Despite the importance of this sector, however, it faces major challenges in accessing bank financing, especially in light of its lack of adequate guarantees to obtain banking facilities, and the trend of banks in general towards avoiding the risks associated with financing the activities of this sector as a result of the lack of sufficient information, and the sector's facilities not having financial records Audited credit, extended credit history, and limited availability of credit guarantee systems and asset records transferred in a number of these countries .
As a result, the proportion of bank financing granted to this sector does not exceed 8% of the total banking facilities in the Arab countries. This percentage varies according to the Arab countries, where the highest is recorded in Morocco, where about a third of banking facilities go to this sector, while the share of the sector in the total banking facilities decreases significantly in the rest of the Arab countries .
In light of the foregoing, financing through the financial markets is one of the channels of financing that have recently played an important role in providing the necessary financing for the activities of this sector not only at the global level, but also at the regional level. Accordingly, some financial markets have recently moved to create specialized exchanges to finance small and medium enterprises, while others have tended to establish specialized platforms for these establishments within the existing stock exchanges.
Globally, the London Stock Exchange for Small and Medium Enterprises is the most successful in the world in mobilizing finance for small and medium enterprises. The market recently succeeded in providing financing to 3,500 small and medium-sized enterprises by the end of 2019 with a total financing amounting to more than 98 billion pounds, 60 percent of this amount went to financing new issues for listed companies, which enhanced the opportunities for expansion of these companies. One of the most important factors for the success of this exchange is the existence of a regulatory framework based on disclosure and governance.
The French Euronext Stock Exchange is considered one of the most prominent stock exchanges dedicated to small and medium enterprises, and this stock market is characterized by its success in attracting family companies to be included in this market, where the number of listed family companies exceeds 240 family companies with a total market value of 1.2 billion euros, and a realized increase in capital These companies amounted to 10.4 billion euros. The stock market also provides financing opportunities not only through share issues, but also through bond issues, which have reached about 12 thousand issues since 2019, including 170 issues of green bonds.
In the context of its endeavor to enable small and medium enterprises to access financial markets, a number of Arab countries launched exchanges or platforms parallel to the main money market to include small and medium enterprises on more flexible terms. Prominent examples in this field are the experiences of Egypt, Saudi Arabia, Tunisia, and Bahrain. In Egypt, small and medium enterprises are listed on the Nile Stock Exchange, which is the first stock platform for listing and trading shares of medium and small enterprises in the Middle East and North Africa, established in 2010 with rules for listing and trading that are compatible with the nature of these companies, and the number of companies registered there 40 companies. Among the advantages of listing on the Nile Stock Exchange is the possibility of obtaining long-term financing for the development of companies ’businesses by increasing their capital or offering part of their shares for subscription.
For Saudi Arabia, the parallel market "Nomu" was created under the umbrella of the Saudi financial market as an alternative platform for companies wishing to be listed, with fewer listing requirements and more flexible standards, which increases the tools and investment opportunities developed and diversified for all participants and dealers in the financial market .
For Tunisia, an alternative market has been created on concessional terms with the aim of providing low-cost financing to encourage SMEs to join the financial market. The investment market in Bahrain also provides a more easy regulatory framework in terms of listing and disclosure requirements for emerging companies compared to the main market of the Bahrain Stock Exchange. On the other hand, efforts are being made in a number of Arab countries, among them, for example, Lebanon, Sudan, Iraq, Morocco, the Emirates and Qatar, to enable small and medium enterprises to also benefit from financing through financial markets.
It is worth noting that the Arab Monetary Fund has been interested since 1995 in monitoring the development of the periodic performance of Arab stock exchanges through the calculation of a composite index that measures the development of the performance of Arab financial markets combined weighted by the market value of these stock exchanges. The index currently includes seventeen Arab financial markets .
The full version of the issue is available at this link
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