Khaleej Times - ADX, FTSE Russell to create new benchmark indices

Vijay Valecha, Special to Khaleej Times January 11, 2022

The Abu Dhabi Securities Exchange’s (ADX) robust strategy to be recognised as a global exchange was manifested on Tuesday with the announcement of its partnership with FTSE Russell — a wholly-owned subsidiary of the London Stock Exchange Group — to develop co-branded indices, supporting the exchange’s recently launched derivatives market.

The world of finance often sees asset managers, financial institutions, ETF providers, and investment banks use FTSE indices to benchmark their performance, and create new products, which are used worldwide.

Arne Stall, chief executive officer of FTSE Russell, said: “ADX is an innovative and vibrant marketplace that empowers the UAE’s economy. We are delighted to work together to strengthen the country’s capital markets with open access to data, pricing, and performance metrics. Our collaboration confirms FTSE Russell’s commitment to the Middle East region and we look forward to announcing a range of new benchmarks in the coming months.”

The FTSE ADX General Index (FADGI) is replacing the ADX General Index, and FTSE ADX sector indices will take the place of the existing sector indices, leveraging the Industry Classification Benchmark.

ADX is the first exchange in the region to make FTSE Russell its index administrator. Further new indices will be co-developed under the partnership to support ADX’s vision of introducing tradable new index products on its market.

The exchange launched single stock futures in the fourth quarter of 2021 following an agreement sealed in September with Nasdaq to deliver matching, real time clearing and settlement technology as ADX broadens its asset class offerings.

The FTSE ADX General Index will include all eligible companies listed on the ADX and ten sector specific indices (consumer discretionary, utilities, consumer staples, energy, financial, healthcare, industrials, real estate, telecommunications and basic materials).

FTSE Russell classifies UAE as a ‘Secondary Emerging’ market within its Global Equity Index Series (GEIS). As part of the FTSE Russell and ADX agreement, a new series of sustainable finance indices and Shariah compliant indices are also planned.

FTSE Russell is committed to continued investment and innovation in the UAE and the wider region. Saeed Hamad Al Dhaheri, chief executive officer of Abu Dhabi Securities Exchange, said: “Our partnership with FTSE Russell is part of ADX’s wide-ranging strategy to develop a dynamic exchange, which includes investment in state-of-the art market technology and increasing the opportunity set for investors and issuers. The new range of FTSE-ADX indexes will provide robust benchmarks and support the listing of index derivatives, ETFs other index-based products on the exchange.”

ADX’s benchmark index, the ADI, crossed the 9,000-point threshold in 2021 for the first time. The benchmark gauge rose 68 per cent last year, making it one of the best performing exchanges in the world. At the same time, the exchange’s market capitalisation more than doubled to Dh1.6 trillion with net foreign investment reaching Dh15.2 billion.

Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services, said: “The creation and adoption of the new FTSE ADX index will provide investors in the ADX an enhanced and accurate index measure to monitor their investments. This move, over time, will attract more institutional and global investors to actively participate in the ADX thereby increasing the overall market liquidity and volumes.”

So, how will this partnership benefit investors in the region?

“The co-branding of ADX indices with FTSE Russell will enable the exchange’s stock performance measurement criteria to come in line with global standards. One immediate advantage of co-branding with FTSE will be the creation of index ETFs, leading to more fund inflows into ADX shares. In addition, FTSE has a lot of reputation in the investment world. So if a fund manager wants exposure to Middle East shares, they might go for an FTSE ADX ETF as it eases the investment process. For ADX, it obviously means deeper liquidity and access to the largest financial institutions,” said Vijay Valecha, CIO of Century Financial.

The UAE continues to build bridges to enhance business opportunities. Yet again, the UAE is the first in Gulf region to forge such partnership with FTSE Russell, pointed Dhaval Jasani, founder and CEO, ZTI Global.

“In view of FTSE’s capabilities, investors in UAE will have plethora of investment products to explore across various asset classes and take an informed decision, considering wide variety of choices in terms of strategies and products. This partnership will certainly enhance trading volumes at ADX, also opening doors for new products to be introduced across asset classes,” he said.

Retail participation in stock trading has been steadily rising across developed and emerging markets and such alliance ideally provides global platform and global experience to UAE Investors. “Being local, trading global” aptly summarises this partnership, explained Jasani.