Abu Dhabi Securities Exchange (ADX) must push forward with its initiatives to attract more foreign institutional investors to help ensure the growth and relative stability of the market.

Following the upgrade of the UAE to emerging market status last June by the index compiler MSCI, the ADX has attracted an increasing number of foreign institutional investors, with numbers jumping from 380 in 2013 to 1,106 in 2014.

The increased presence of foreign institutional investors will help diversify the range of investors active in the market and could help prevent huge spikes or declines in the stock market activity.

ADX has historically been driven by individual investors that can often be driven by market sentiment, as opposed to long-term economic fundamentals. This can mean the market becomes dominated by short-term investors, withdrawing investment and selling off stock when they see signs of trouble.

The exchange is already building on the success of the MSCI upgrade last year, with ADX CEO Rashed al-Blooshi saying at least four Abu Dhabi-based companies could be added to the index by mid-2015.

Large Abu Dhabi companies, such as property developer Aldar and Abu Dhabi Commercial Bank (ADCB), are already included in the index.

The ADX is looking at other means of drawing in foreign investors, with the exchange keen to attract more dual listings of Abu Dhabi companies that have so far chosen to only list in London.

ADX is also encouraging a broader range of companies to consider listing on the exchange. Currently major segments of the UAE economy, including petrochemicals, healthcare and education are sparsely represented.

If the exchange continues to develop such initiatives, the exchange is ideally positioned for growth.

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