Commodities attract more foreign investors

Offshore investors, particularly those from the GCC with interest in commodities, are increasingly making Dubai as their destination for investments.

Brokerage firms registered with the Dubai Multi Commodities Centre (DMCC) affirm that investors abroad, especially the ones in the region, are beginning to account for as much as 40 to 60 per cent of their business.

A few companies are moving abroad and setting up shops to tap investors.

Securities and Commodities Authority (SCA) the UAE financial markets regulator is now considering the first application from a firm interested in opening its offices in Oman, Kuwait and India. The applicant, JRG International DMCC, plans to tap investors looking for commodities exposure and bring foreign investments to Dubai Gold and Commodities Exchange (DGCX).

Interestingly, a few firms have removed the term 'commodities' as a suffix of their name and have placed 'international' instead to give a vent to their growing ambitions.

Dubai Gold Securities (DGS), a DMCC product listed on Nasdaq Dubai that offers direct exposure to gold, has set regional markets as a priority. Managing Director of Dubai Commodity Asset Management Sameer Meralli said its natural for the product to focus abroad considering the demand levels.

"With the gradual opening of global markets and easing of foreign capital investment restrictions, it is a natural progression for international investors to seek investment opportunities," Meralli said.

"It was built specifically for the Middle East market to attract both conventional and Islamic capital flows. Conversely, international interest in Dubai Gold Securities has also been strong as a number of international institutions have shown interest in accessing a product which holds all the benefits of the conventional suite of exchange traded gold products but also possesses full Shariah approval," Meralli said.

There are precisely two reasons that are cited for an offshore investor's interest in Dubai based products. One, DGCX is the only commodities exchange offering multiple products in the region (the other being Dubai Mercantile Exchange that is focused on crude). Secondly, investors in the Middle East, especially in the Gulf, identify with Dubai-based products. "A Shariah-compliant fund such as DGS brings additional investor interest," Meralli said.

JRG International (formerly JRG Metals and Commodities), a DMCC-registered firm, plans to open its offices in Oman, Kuwait and India. Forty per cent of its clients and investments come from offshore investors, a figure that its Assistant Vice-President Anoop PS says can rise up to 60 per cent.

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