x Abu Dhabi, UAEMonday 22 January 2018

Axe falls on Shuaa research unit

Markets Update: Shuaa Capital has reduced its research department in an effort to cut costs.

Shuaa Capital, a Dubai investment bank, has drastically scaled back its equities research department amid a lengthy downturn in trading on Dubai's stock exchanges.

"There is no way to make money on research," said Oliver Schutzmann, the company's chief communications officer.

The move virtually ends the lender's activity in the equities research sector, although it is retaining two staff members at the unit.

"It does not make economic sense to offer fundamental research on shares of companies nobody is buying," said Mr Schutzmann.

Shuaa closed its retail brokerage last month after reporting in November that it had suffered a third-quarter loss of Dh156.2 million (US$42.5m). The bank has not reported a full-year profit since 2007 and has lost money in eight of the past 12 quarters. Shuaa's shares have declined 62.7 per cent in the past 12 months.

"This is very negative for the company," said Mohammed Ali Yasin, the chief investment officer at CAPM Investment in Abu Dhabi. "It may cut costs now but leaves question marks about their continuity as a full-fledged investment bank."

Many brokerages closed after unrest in the Arab world and the European debt crisis reduced trading volumes. Taib Securities, the brokerage arm of Bahrain's Taib Bank, last week said it was to close its UAE operations and focus on its home market.

The value of equities traded by UAE brokerages fell 45 per cent to Dh57 billion last year compared with 2010. Fifty-seven brokerages still operate in the country, down from 103 at the start of last year.

Many foreign investment banks have restructured their operations in the UAE to cope with falling trading volumes. Germany's Deutsche Bank recently moved its head of equity capital markets back to London from Dubai. Nomura, based in Tokyo, closed its Dubai equity research unit, and the UK's HSBC has closed its retail brokerage unit in the Emirates.

"It seems that few investment banks will remain open for business until trading volumes and confidence return to the market," said Tariq Qaqish, a senior fund manager at Al Mal Capital in Dubai. "There is nothing wrong with the economy. The macroeconomic picture looks better, but the confidence remains the missing link."