End to Foreign Owners Ban Spurs Biggest Etisalat Gain in DecadeDana El Baltaji and Sarmad Khan
The second-biggest telecommunications provider in the Middle East soared the most in 10 years after the United Arab Emirates said it would lift a ban on foreign ownership of shares in the company.
Emirates Telecommunications Corp. jumped 15 percent, the most permitted in a day, to 13.80 dirhams at the close in Abu Dhabi. The gain propelled the ADX General Index to its biggest advance this year. The U.A.E. is lifting the restriction on condition that foreign ownership doesn’t exceed 20 percent, the company said in a statement on Monday. The change will come into force after “additional legal and legislative procedures,” it said on Tuesday.
Lifting the restriction means Etisalat may be considered for inclusion in MSCI Inc.’s emerging markets index, EFG-Hermes Holding said in an e-mailed note to clients. The company could account for 0.14 percent of the gauge and see about $360 million in passive inflows from inclusion, according to the Cairo-based investment bank. The phone operator’s shares have climbed 39 percent this year, making them the third-best performer on Abu Dhabi’s 64-member ADX General Index.
“What has been traditionally a little bit of an illiquid stock with very long term holders will see a lot of activity once it opens up,” Saleem Khokhar, the head of equities at National Bank of Abu Dhabi’s asset management group, said by phone from Abu Dhabi. “It brings U.A.E. markets in focus again for foreign investors, especially with Saudi Arabia’s market opening up.”
The announcement comes about a week after Saudi Arabia opened one of the world’s most restrictive stock markets to foreign direct investment for the first time. All in all, qualified foreign investors can hold as much as 20 percent of most Saudi stocks.
Founded in 1976, Etisalat has about 11 million customers in the U.A.E. and operations in at least 18 countries, according to its website. It’s the Middle East’s second-biggest publicly-traded telecommunications company by market value after Saudi Telecom Co. Abu Dhabi’s index of equities rose 2.9 percent to the highest since November.
The U.A.E. government owns 60 percent of Etisalat through the Emirates Investment Authority, its only sovereign wealth fund, and has no intention of reducing its stake for now, the company said on Monday.
EFG-Hermes, which has a buy rating on Etisalat, said the company’s main competitor Emirates Integrated Telecommunications Co., also known as Du, may also consider lifting foreign ownership restrictions. Shares in the company, which is almost 40 percent owned by the Emirates Investment Authority, jumped the most in four months. Chief Executive Officer Osman Sultan declined to comment on the matter when reached by phone today.
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