DIFX TO BECOME NASDAQ DUBAI

C O N F I D E N T I A L DUBAI 000416

DEPARTMENT FOR NEA/FO, NEA/ARP (BMASILKO) AND EEB; SIPDIS

E.O. 12958: DECL: 11/10/2018
TAGS: ECON EFIN EINV AE
SUBJECT: DIFX TO BECOME NASDAQ DUBAI

REF: (A) 07Dubai 540 (B) Dubai 358

CLASSIFIED BY: Paul Sutphin, Consul General, Consulate General
Dubai, UAE.
REASON: 1.4 (b),(d)



Classified by Consul General Paul Sutphin, reasons 1.4 (b) and
(d).


1. (C) Summary: Building on last year's deal with NASDAQ (ref
a),the Dubai International Financial Market plans to announce
its re-branding as "NASDAQ Dubai" in late November. As a
continuation of industry trends in exchange management, Borse
Dubai CEO Essa Kazim is considering potential NASDAQ/Borse Dubai
expansion plans into Europe (including the London Stock
Exchange) and China. Reflecting on the 50 percent decline in the
UAE stock markets this year, Kazim stressed investor panic
rather than market fundamentals are largely to blame. End
Summary.

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Big Plans for new "NASDAQ Dubai"

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2. (C) During a November 5th meeting with DPO and Pol/econoff,
Essa Kazim, Chairman and CEO of the year old Borse Dubai (the
Dubai government majority-owned holding company for the Dubai
Financial Market (domestic stocks) and Dubai International
Financial Exchange (internationally-traded stocks)) revealed
that on November 20 the Dubai International Financial Exchange
(DIFX) will announce its re-branding as NASDAQ Dubai. As part
of a complicated deal last year between Borse Dubai, NASDAQ, and
OMX (the Scandinavian exchange holding company),NASDAQ acquired
a 33 percent stake in DIFX, while Borse Dubai (BD) received a
19.9 percent share of NASDAQ and an agreement allowing its DIFX
subsidiary to use the NASDAQ brand name.


3. (C) Kazim commented that the NASDAQ/BD partnership is looking
to strengthen its position in both Europe and China (although he
noted China is a longer term project given existing and onerous
regulatory restrictions). BD currently has a 22 percent stake
in the London Stock Exchange (LSE),most of which was acquired
in a separate deal with NASDAQ after the U.S. exchange failed in
its 2007 LSE takeover bid. Kazim suggested a renewed joint
NASDAQ/BD attempt at acquisition of the LSE might be in the
offing. BD also maintains a 22 percent share in the Borsa
Italiana. Consolidation of exchanges generates operational
efficiencies, key to overall profitability.

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Dubai Stocks Already Bottomed Out?

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4. (C) Reflecting on the more than 50 percent year to date
decline in the Dubai stock market, Kazim opined that the fall
has been primarily driven by global economic fear, not market
fundamentals. He cited as an example Tamweel, a majority Dubai
government-owned local mortgage company rumored to be facing
problems as a result of speculative lending. Kazim downplayed
Tamweel's troubles, however, noting that its capital assets far
exceed its current market valuation. Kazim predicted better
times ahead and argued that UAE stock prices, especially in the
financial and real estate sector, are already reflecting
worst-case scenarios and are unlikely to drop further in the
coming year.


5. (C) Comment: Kazim's optimism about Tamweel is definitely
not shared by others in the mortgage industry here; Tamweel --
linked to a series of local financial scandals (ref B) -- and
the other major local mortgage lender, the EMAAR-linked AMLAK,
are being forced to merge in a shotgun wedding allegedly ordered
by Dubai Ruler Mohammed bin Rashid al Maktoum. Together, the two
companies have approximately UAED 17b in outstanding loans,
which one very knowledgeable Western banker called "very, very
speculative-if you could stand up and breath, you got a
mortgage."

SUTPHIN