DIFC & UAE: Monetary & Financial Statistics 2008 – Q1 2012 Dr. Nasser Saidi, Chief Economist, DIFC Authority 28 May 2012

Agenda DIFC Monetary & Financial Statistics: New Publication Deposits and Loans: DIFC & GCC Comparison with other International Financial Centers Assets under Management: DIFC Equity and Commodity Markets: Nasdaq-Dubai and DME Addendum: DIFC registered companies and license categories Summary Statistics

DIFC Monetary & Financial Statistics DIFC has been collecting data and statistics on the development of the centre and the activities of the businesses, organizations and agencies since 2007, with the publication and dissemination of the DIFC Economic Activity Survey (EAS). The DIFC EAS reports on aggregate and sectorial income & expenditure arising from activities in the DIFC. The EAS also reports on assets, investment and employment in the DIFC. In line with complying with best international standards, the DIFC is now publishing and disseminating Monetary & Financial data and statistics. The frequency will be quarterly.

DIFC Monetary & Financial Statistics Data for the current publication were collected from different sources. DIFC related data and estimates were provided by DIFC Economics team and DFSA. Other information, including data on deposits, credits, and assets under management outside the DIFC, were collected from monetary and statistical authorities’ websites and Reuters databases; estimates are those of the DIFC Economics team. Comparison of DIFC financial entities with the GCC or UAE banks should be done cautiously, as the DIFC companies are involved mostly in wholesale and investment banking, and NOT retail; additionally, the transactions in the DIFC are mainly in USD, and not in local currency (in compliance with the Federal Law No.8 of 2004, Article 4). Also worth noting that a substantial portion of the DIFC financial entities’ clients are institutional investors, who tolerate high capital mobility, when balancing between risks and returns. This explains higher volatility of DIFC’s deposits, credits, and assets under management, compared to those of the GCC or UAE banks’.

Developments in 2008-Q1 2012 During the last 3 years deposits out of DIFC grew at an average annual rate of 39%. Total volume of deposits increased 2.47 times to reach US$ 12.9 billion as of end of 2011 & US$12.8 in Q1 2012. Average annual growth of loans and advances was 40%. They increased 2.53 times, and amounted USD 13.1 billion at end 2011 and US$ 14.7 in Q1 2012.. After 10.4% decline in 2010 deposits of the DIFC companies grew at impressive 75.8% in 2011; growth rate of credit portfolio was lower, but still high (+38.1%). Assets under management at the DIFC based companies were US$ 7 billion end 2011 and US$ 8.1 in Q1 2012. In the first quarter of 2012 DIFC deposits were down by 1.1% qoq (+25.2% in Q1 2011), while DIFC credit grew by a high 12.4% (+10.6%). High growth rates of deposits and credits were observed in the first and third quarters of 2011. done Source: DIFC Economics, DFSA

Deposits & Loans: Annual and quarterly data for DIFC and GCC Deposits and credit growth rates of DIFC based companies have been substantially higher compared to those of the GCC area banks, albeit from a low base. Higher growth expected to continue as DIFC based companies expand their activities Source: DIFC Economics, DFSA, UAE Central Bank, EcoWin

Credit portfolio distribution by Type of Economic Activity: DIFC (Q1 2012) Source: DIFC Economics, DFSA

Investments: Distribution by Geography & Type of Economic Activity (Q1 2012) Total volume of investment = USD 3.7 bn Distribution of Investments by type of economic activity Geographical Distribution of Investments Done Source: DIFC Economics, DFSA

Deposits and Loans: Comparison of DIFC & UAE with other Financial Centres Deposits and loans at the DIFC based financial companies are lower than those in some other international financial centers with similar characteristics. Other financial centres have access to their domestic markets. When combined with the data on UAE based banks, data on deposits and loans are comparable in absolute terms, however demonstrating lower financial intermediation as measured by percentage of GDP. Source: DIFC Economics, DFSA, UAE Central Bank, EcoWin Reuters

DIFC Assets under Management: 2008- Q1 2012 The number of DIFC companies involved in asset management activities was 27 at end-2011 (25 at end-2010). Number has increased to 28 in Q1 2012 DIFC based companies’ assets under management were stable during the observed period, at an average level of USD 7.0-7.5bn, with temporary spikes in mid-2008 and beginning of 2010 At the end of Q1 2012, assets under management by DIFC-based companies was at USD 8.1bn The Centre is still quite young and growing, with some companies placing their AUM on their “external” books (i.e. not on the books of their DIFC entities) Source: DIFC Economics, DFSA

UAE vs Regional and Global Equity Markets Compared to global and regional equity markets, UAE exchanges have significantly underperformed in the past three years. This DFM-ADX gap is largely due to the concentration of stocks and domination of a small number of companies in the DFM. A potential merger of exchanges could lead to improved performance & trading volumes. UAE firms listed on the local exchanges showed remarkable profits growth last year, which was not reflected in the stock indices. DFM, Nasdaq Dubai and ADX are highly correlated with each other, while their correlation with MSCI GCC is higher than that with global and emerging markets, therefore providing diversification benefits. FTSE has reclassified the UAE, but the MSCI delayed reclassifying the market in 2011, in spite of the recent improvement in the process of DvP. Correlation matrix for daily percentage changes of indices*: MSCI EM, GCC, DFM & ADX (Dec’07-Mar’12) * Only for the days when trades take place on all exchanges, i.e. Monday through Thursday Source: Bloomberg, DIFC Economics

GCC Equity Markets: Market Capitalization and # of Companies Tadawul (Saudi Arabia) hosts about 25% of the publicly traded firms in GCC, accounting for about half of the region’s market capitalization, followed by UAE at 20%. up Source: Bloomberg, DIFC Economics

Dubai Mercantile Exchange The Dubai Mercantile Exchange, launched on June 1st, 2007, has emerged as an international energy futures & commodities exchange in the Middle East, providing price transparency and market liquidity for sour crude oil. It lists Oman crude oil as a benchmark for the region. DME figures demonstrate a 19% year- on-year increase in trading volumes in 2011. The new record for physical delivery was reached in Aug 2011, when total volume of traded crude oil amounted 95.4 million barrels. DME had 20 clearing members, 25 off- floor members and 7 equity members as of end of 2011. Not up Source: Dubai Mercantile Exchange

DIFC Companies’ Growth Since Inception Growth of number of active companies at the DIFC accelerated to 7% in 2011, following a slowdown during 2009-2010. The number of companies is already up 2% to 861 as of Mar 2012 from 2011. Net number of active companies Breakdown of Registered Companies Not up Source: DIFC Authority

DFSA Regulated Firms The number of companies authorized by the DFSA reached 269 in the end of 2011 (244 as of end of 2010). Companies may hold more than one license (average number of licenses held by authorized firms was 3). Most actively used license was a criteria in assigning companies to a specific license category. Category 4 license was the most actively used among authorized firms. Source: DIFC Authority, DFSA

DIFC Deposits, Loans & Assets Under Management Source: DIFC, DFSA Note: yoy = Quarter-on-previous year quarter

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