DIFC & UAE: Monetary & Financial Statistics2008 – Q1 2012Dr. Nasser Saidi,Chief Economist, DIFC Authority28 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.

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 EconomicActivity: DIFC (Q1 2012)

Source: DIFC Economics, DFSA

Investments: Distribution by Geography & Type of Economic Activity (Q1 2012)

Distribution of Investments by type of economic activity

Geographical Distribution of Investments

Source: DIFC Economics, DFSA

Total volume of investment = USD 3.7 bn

• 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.

Deposits and Loans:Comparison of DIFC & UAE with other Financial Centres

Source: DIFC Economics, DFSA, UAE Central Bank, EcoWin Reuters

DIFC UAE UAE & DIFC Singapore Hong Kong Luxembourg2008 5,230 251,362 256,592 218,464 638,086 290,3842009 8,217 267,738 275,956 250,040 669,094 292,5452010 7,361 285,995 293,356 295,751 715,435 268,5162011 12,939 291,471 304,410 321,875 785,865 278,063

DIFC UAE UAE & DIFC Singapore Hong Kong Luxembourg2008 5,184 208,871 214,055 186,278 309,059 288,6942009 8,133 220,136 228,269 194,878 332,526 272,0142010 9,506 213,678 223,184 240,910 424,022 255,9842011 13,125 223,134 236,259 282,842 504,110 233,501

Deposits, USD mn (estimate, source: EcoWin Reuters)

Loans, USD mn (estimate, source: EcoWin Reuters)

DIFC UAE UAE & DIFC Singapore Hong Kong Luxembourg2009 57.1% 6.5% 7.5% 14.5% 4.9% 0.7%2010 -10.4% 6.8% 6.3% 18.3% 6.9% -8.2%2011 75.8% 1.9% 3.8% 8.8% 9.8% 3.6%

DIFC UAE UAE & DIFC Singapore Hong Kong Luxembourg2009 56.9% 5.4% 6.6% 4.6% 7.6% -5.8%2010 16.9% -2.9% -2.2% 23.6% 27.5% -5.9%2011 38.1% 4.4% 5.9% 17.4% 18.9% -8.8%

Deposits, growth rates

Loans, growth rates

UAE & DIFC Singapore Hong Kong Luxembourg2008 87.7% 116.2% 299.9% 527.8%2009 96.4% 118.0% 308.7% 529.7%2010 88.9% 120.8% 303.2% 474.2%2011 83.0% 123.0% 304.1% 470.4%

UAE & DIFC Singapore Hong Kong Luxembourg2008 73.2% 99.0% 145.2% 524.8%2009 79.8% 91.9% 153.4% 492.5%2010 67.6% 98.4% 179.7% 452.1%2011 64.4% 108.1% 195.1% 395.0%

Deposits, % of GDP (estimate)

Loans, % of GDP (estimate)

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)

Source: Bloomberg, DIFC Economics

* Only for the days when trades take place on all exchanges, i.e. Monday through Thursday

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%.

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.

Source: Dubai Mercantile Exchange

DIFC Companies’ Growth Since Inception

Source: DIFC Authority

Breakdown of Registered CompaniesNet number of active companies

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.

Category 1 Category 2 Category 3 Category 4 Category 5

Accepting Deposits Providing Credit Dealing in

Investments as Principal where it does so only as a Matched Principal

Dealing as Agent

Managing Assets

Operating a Collective

Investment Fund

Arranging Credit or Deals in

Investments

An Islamic Financial Institution whose entire business is conducted in accordance with Shari'a, and which Manages a Profit Sharing Investment Account

Advising on Financial

Products or Credit

Arranging Custody

Insurance Intermediation

Insurance Management

Managing a Profit Sharing

Investment Account Managing a Profit

Sharing Investment Account

Managing a Profit Sharing

Investment Account

Dealing in Investments as

Principal, except where it does so as

a Matched Principal

Providing Custody & Trust

services

Acting as the Trustee of a fund

Operating an Alternative

Trading System

Providing Fund Administration

PIN

Prudential-Insurance Business

Representative office

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, DFSANote: yoy = Quarter-on-previous year quarter

Thank you!