The Abu Dhabi Securities Exchange (ADX) has decided to embrace FTSE Russell’s Industry Classification Benchmark (ICB) for all its listed equities in order to align with global standards and attract more international investors.
The introduction of the ICB is part of the transition of ADX indices to the co-branded FTSE ADX index series, under the strategic partnership between FTSE Russell and ADX. The adoption of ICB by the Exchange is aimed at providing greater market transparency, enabling accurate research and supporting institutional investors portfolio management and asset allocation strategies.
The partnership between FTSE Russell and ADX is aimed to develop co-branded indexes and will support the recent launch of ADX’s derivatives market and pave the way for the creation of more index-linked investment products. In January, the FTSE ADX General Index replaced the ADX General Index.
FTSE Russell’s ICB is a rigorous, rules-based transparent methodology to classify companies into relevant sectors, primarily based on a company’s business, determined by its primary source of revenue. The ICB categorises companies and securities across four classification levels – Industry, Supersector, Sector and Subsector – with each company assigned to a category that best represents its business. ICB is used by several leading exchanges around the world, including the London Stock Exchange and Euronext.
Saeed Hamad Al Dhaheri, Managing Director and Chief Executive Officer of Abu Dhabi Securities Exchange, commented, “The adoption of the ICB and our partnership with FTSE Russell is an important pillar of our ADX One Strategy, underscoring our commitment to embrace best global standards for our market. The ICB will support new indices that we are creating with FTSE Russell, which will encourage the listing of index products and highlight the unique investment opportunities on the ADX, driving greater institutional flows into our market.”
Arne Staal, Chief Executive Officer, FTSE Russell, said, “ADX’s adoption of ICB’s classification standards will support the exchange’s transparency and standards to meet the requirements of the global investment industry. The step will raise international awareness on investment opportunities across the UAE’s capital markets.”
The success of the ADX One Strategy in boosting listings and rolling out innovative products and services is reflected in the more than five-fold increase in traded values in 2021. Between 2020 and 2021, traded values (buy and sell) on the exchange increased 407 percent from AED 145 billion to AED 739 billion, boosted by higher levels of domestic and international investment. The increased demand for Abu Dhabi stocks helped propel the exchange’s benchmark index 64 percent higher, making the measure one of the world’s best-performing equity gauges in 2021. Meanwhile, the market capitalization of stocks listed on the ADX more than doubled to a record AED 1.6 trillion.