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Expo 2020 and Dubai Financial Market

Updated on February 8, 2017
DFM 5-year performance
DFM 5-year performance | Source

Dubai Financial Market

In the Middle East, the Dubai Financial Market (DFM) is regarded as one of the leading financial markets. It aims to become a world class regional marketplace, and offers innovative services to various stakeholders in conducting settlement, clearing, trading, and depository of securities, in a transparent and efficient environment. As a public institution, the DFM was established by virtue of Government of Dubai’s Decree 14/2000. The institution launched its operations on March 26, 2000. Later, in the year 2005, it was transformed into a public shareholding company. DFM is the first financial market in the Middle East that offered its shares through an IPO. It operates in accordance to the Shari’a principles. Moreover, it is regulated and governed by the securities and commodities authority (SCA), UAE. With a vision to establish a dynamic force in the region, the DFM, in the year 2010, consolidated its operations with NASDAQ Dubai. This consolidation provides investors an easier access to Nasdaq Dubai and DFM’s listed securities, and a greater choice of asset classes.

The overall performance of the Dubai Financial Market General Index (DFMGI) in the last five years has improved, especially during the year 2014. However, the market’s performance declined in terms of monthly prices after September 2014.

Dubai Expo 2020

The UAE, in November 2013, won the right to host World Expo 2020 in Dubai. It will be the first time that the region (Middle East, North Africa, and South Asia) will hold such a gigantic global event. World Expos are regarded as one of the most enduring and largest global-mega events, which attract millions of tourists and visitors, and enable interactions between hundreds of participants including businesses, international organizations and nations. The theme under which Dubai Expo 2020 will be held is,

“Connecting Minds, Creating the Future”

The Dubai Expo 2020 will serve as a source and catalyst in connecting minds and inspiring participants visiting from different parts of the world with an aim mobilize around shared challenges. The event expects to attract around 25 million visitors, and influence various sectors of the UAE economy, including tourism, hospitality, real estates, and the financial sector.

Dubai Expo 2020, Tourism, and Economic Growth
Dubai Expo 2020, Tourism, and Economic Growth | Source

Relationship between Mega-Events and Stock Markets

Previously, mega events in different parts of the world have affected the host economies. For instance, a positive economic impact of the World Cup 2010 has been explained. The recent global financial crisis can also be regarded as a mega event that negatively influenced various economies worldwide. It is projected that Expo 2020 will cause $100-$150 million of foreign investment across various sectors in UAE and Dubai, especially in the tourism sector. Tourism and travel-related companies in Dubai offer a variety of services that will attract more visitors, and would result in boosting the sector and the overall economy.

After the announcement of Dubai’s success in achieving the right to host World Expo 2020, the Dubai stock hit a 5-year high. Majority of the respondents to a survey conducted by CFA Society Emirates consider that the impact of Expo 2020 would be positive on DFM’s stock price. It is anticipated that Expo 2020 would have a positive influence on equities. The sectors, such as tourism, real estate, and construction, that will benefit from the event, are more likely to achieve growth in the market value of their equity due to increased performance and profitability. These sectors as a whole would also benefit the Dubai financial market. It is also empirically investigated that Expo 2020 will influence the stock market prices of the banking, insurance, and investment sectors. It suggests that the influence of Expo 2020 on the Dubai Financial Market may not be direct; as various business sectors would be affected positively due to the upcoming event, which may enhance their stock price, and subsequently, the performance of the overall index.

Do you agree that Expo 2020 will influence Dubai Financial Market positively?

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