United Arab Emirates Financial Markets

Money is used in many ways. You can put it in a bank (saving account) and make interest without having to work. Because the money is your saving account will not stay their without being used. It is used as a loan to help others do investments, buy a home, go to college and so on. When the bank gives someone a loan, it actually uses the money people drew into the bank. And off course, one day this money has to be returned back with an interest for the bank.

Money is also used to make investments, when you buy bonds from a company, you are giving them a loan, and even when you buy a stock, you are actually buying a part of that company. This company will use the money to get bigger, hire employees, advertise, produce new products...Etc.

Businesses can be big or small. When only one person owns a business, it is called a sole proprietorship. Advantages of a sole proprietorship might not have so much money to get bigger. And the owner will have to take all the risks of operation. A sole proprietorship can join with other people to form a partnership. Disadvantages are that decisions are hard to be made, and the cash might be limited. But the advantages are that the risks are limited. And if the business was sued by law, other partners and the money outside the company will be safe.

Other ways which help a company grow is using the capital and profits or borrow money from the bank. The bank loan will have to be paid with interest, and the bank will limit how much it will lend a company according to its size and the capital it has.

And another good way is issuing bonds. This means that the company sells bonds to investors. And after some time, the company pays back people the amount they invested along with profits. The more the investor invests the more money he gets back if the company was profitable.

In addition to the options mentioned above, selling a part of ownership in a corporation to the public helps to raise capital. Selling a company's stock can get so much cash that can improve the company. When the company sells its stocks to the public this means that the company is "going public". The company will get an investment banker to evaluate the company, and to put a price on the stock. When the company sells its first stocks, this is called Initial Public Offering (IPO) and is sold in the primary market.

Then when the stockholders want to sell the stock again, it is sold on a secondary market. When the company is selling stock it is transformed from a private business owned by a few people to a public business owned by a large amount of investors.

How Investment Takes Place

A financial market is a place where people and company's enter into contracts to sell or buy specific products such as stocks and bonds. A buyer would always want to buy at a lowest price possible, and a seller would always want to sell at the maximum price he can. There are many different types of financial markets depending on what you want to buy or sell. The most two popular Financial Markets in the United Arab Emirates are Dubai Financial Market (DFM) and Abudhabi Securities Market (ADSM). Examples of companies selling stocks and bonds in the U.A.E:

Dubai:
- Air Arabia
- Amlak Finance
- ARAMEX
- Deyaar Holding
- Dubai Islamic Bank
- Mashreq Bank
- Tabreed
- Takaful House
- SHUAA capital.
- Oman Insurance Company
- Drake And Skull

About Dubai Financial Market: Dubai Financial Market (DFM) was established as a public institution having its own independent corporate body. DFM operates as a secondary market for the trading of securities issued by public shareholding companies, bonds issued by the federal Government or any of the local Governments and public institutions in the country, units of investment funds and any other financial instruments, local or foreign, which are accepted by the market. The DFM commenced operations on March 26, 2000. Following its initial public offering in November 2006, when DFM offered 1.6 billion shares, representing 20 per cent of its paid-up capital of AED 8 billion, DFM became a public joint stock company. Following the IPO, the Government of Dubai retained the remaining 80 per cent of DFM Company through Borse Dubai Limited. http://www.dfm.ae

Abudhabi:
- AABAR
- ABNIC
- CBI
- Bank Of Sharjah
- Dana Gas
- Al Dhafra Insurance
- Emirates Driving Company
- Gulf Cement
- Qatar Telecom
- RAK Properties

About ADSM:

The Abu Dhabi Securities Exchange (ADX) was established on 15 November 2000 by Local Law No. (3) of 2000, the provisions of which vest the Market with a legal entity of autonomous status, independent finance and management, and give ADX the necessary supervisory and executive powers to exercise its functions.

These functions are:

o Provide opportunities to invest savings and funds in securities in order to benefit national economy.
o Ensure the soundness and accuracy of transactions and to ensure the interaction between demand and supply in order to determine prices.
o Protect investors through establishing fair and proper dealing principles between various investors.
o Impose stringent controls over securities transactions to ensure sound and conduct procedure.
o Develop investment awareness by conduction studies and issuing recommendations in order to ensure that savings are invested in productive sectors.
o Ensure financial and economic stability and develop trading methods in order to ensure liquidity and stability of prices of Securities listed on the market.

Moreover, ADX has the authority to establish centers and branches outside the Emirate of Abu Dhabi. To date it has done so in Fujeirah, Ras al Khaimah, Sharjah and Zayed City.

The Abu Dhabi Securities Exchange's board of directors is comprised of seven members nominated by Amiri Decree. The members of the board hold office for a term of three years. The first board of directors was constituted by Amiri Decree No. (8) of 2000.

Stock Markets are made of people who gather in one place at the same time to trade stocks and bonds. This way when someone offers something to be sold, the buyer must be their to buy, and when a buyer wants to buy a stock or a bond, the seller of that stock will be in the same place. New bonds or stocks have to be registered before being listed, and details and information about the company has to given to public before any stock is sold. Investment bankers start to buy large quantities and then sell them in the secondary markets in exchanges.

An individual or an investment firm places an order with a broker for a stock he wants to buy. The broker then puts the offer in the appropriate exchange, the transaction will be done only when there is someone who wants to buy the same thing the seller is offering. When the individual purchases a stock, he will receive a certificate which can be kept buy the owner or can be held by the broker on behalf of the buyer.

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