HSBC Holding said on Sunday it is setting up a brokerage company to give its institutional and retail clients access to the stock markets in the UAE.

HSBC got the licence to offer brokerage services in the UAE, the second-largest Arab economy, where the Dubai and Abu Dhabi markets are trying to attract foreign investment after last year's crash shook investor confidence.

"There is a common theme where the Middle East is increasingly valuable and important to people," said Neil Foster, chairman of HSBC Middle East Securities.

The new service will be available to institutional clients by the end of the year and retail clients by the end of the first half next year, Foster said.

Foreign interest in Gulf Arab stock markets has grown after last year's crash saw four of the seven benchmarks drop more than 35 percent, sending valuations plummeting.

The main stock indexes of Saudi Arabia, Dubai and Abu Dhabi were the three worst performers among 82 tracked last year by US stock market research Birinyi Associates Inc.

Kuwait has led a recovery this year, rising 28 percent. Oman rose to a fresh record close on Thursday and Qatar to a 14-month high.

"The fundamentals of the region are very positive," Foster said. Gulf Arab governments are easing curbs on foreign capital, hoping more institutional investment will help reduce volatility in the bourses, which are dominated by retail investors.

Saudi Arabia last week lifted all remaining restrictions on Gulf Arab investors in its publicly listed stocks, allowing them to trade in financial services, including banks.

Rashed al-Baloushi, acting general manager of the Abu Dhabi Securities Market until this month, told Reuters in June that several foreign banks, including HSBC, were seeking brokerage licences in the United Arab Emirates. Still, international investors are generally restricted in the percentage stakes they can own in companies. - Reuters