x Abu Dhabi, UAESunday 23 July 2017

Bourses' buoyant mood is punctured

Brad Reagan: Just when local markets were rebounding after a dismal few weeks, Aabar Investments comes along and knocks them right back to the turf.

Just when local markets were rebounding after a dismal few weeks, Aabar Investments comes along and knocks them right back to the turf. The company's announcement that it is considering going private - and therefore de-listing from the Abu Dhabi Securities Exchange (ADX) - was posted to the bourse website after the close of trade yesterday. The news deflated the buoyant mood that pervaded the Abu Dhabi and Dubai exchanges the first two days of the week, when both markets moved higher in a sharp reversal of the recent trend.

There were conflicting theories about what sparked the surprising buying frenzy: some traders said it was related to climbing oil prices and China's move to strengthen the yuan; others whispered about rumours that the long-delayed Dubai World debt restructuring was close to a final resolution. Whatever the cause, almost everyone was simply glad that investors were trading again. Aabar's move is likely to derail that nascent momentum.

With 29 per cent of the company publicly traded, it is only the 10th-largest company on the ADX by market capitalisation but is arguably its biggest global player. Its stakes in Daimler, Virgin Galactic and Tesla Motors are high-profile investments that, by extension, provide ADX with additional visibility in the global financial community. But in recent weeks, share prices have dropped here, as they have around the world. A number of companies now trade beneath par value, or Dh1, and a handful sit below 40 fils, the level at which the Emirates Securities and Commodities Authority can suspend trading.

But analysts have been more concerned about declining trading volumes. With fewer trades comes increased volatility and less efficient markets. The pending merger between the Dubai Financial Market and NASDAQ Dubai promises to bring greater liquidity to the companies trading there, and the reported talks involving a tie-up of the Abu Dhabi and Dubai bourses are surely rooted in a desire to achieve a similar result.

Aabar's announcement yesterday should give those discussions increased urgency. When a marquee name such as Aabar starts thinking about withdrawing from the public markets, it is bound to cause some knitted brows. breagan@thenational.ae