Dubai's biggest broker weighs opportunities overseas as local trading volumes decline
Dubai broker Mubasher sets sights on Asia
Dubai's biggest stock broker plans to start operating across south and central Asia amid dwindling trading volumes at home.
Mubasher will branch out into 10 emerging and frontier markets including Pakistan, India, Bangladesh and Sri Lanka and some former Soviet states by the end of the first quarter of this year, said Malek Kanawati, the company's chief executive.
The move is expected to boost the company's gross revenue by 20 per cent by the end of the year, Mr Kanawati said, adding that the growth estimate was "conservative". The company is targeting "markets that are considered to be frontier and out of reach; there is little out there and we can tap into this," he said.
It comes at a time when brokerages have struggled to maintain profits against dwindling volumes and lack of liquidity on the country's two main exchanges, the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market.
The volume of traded shares on both exchanges has fallen below the 100-million mark from pre-crisis highs of about 300 million. Dubai's main exchange lost about 10 per cent in value last year, while the ADX's decline was more marginal at 1 per cent.
Some 20 brokerages have closed down in the country in the past eight months, and industry experts expect more to go to the wall amid few signs of trading activity picking up. There are now 72 brokerages registered in the UAE, according to the latest report from the ADX. "As low as volume is right now, there is not much space for brokerage firms to survive," said Amjad Bakir, the trading manager at Wafa Financial Services. "That means no commissions, and that counts into payrolls and all these expenses."
He expects another 20 brokerages to close down this year.
But Mr Kanawati said Mubasher's ambitions to move outside the GCC would help it mitigate poor domestic market conditions.
"If we stay where we are today, there are two or three very viable competitors doing more or less what Mubasher is doing," he said, citing EFG-Hermes as being "in a class of its own". By moving into frontier and emerging markets, "we are … going to markets with little or no technology," he said.
Emerging markets have been the focus for many investors in the past year as western equities have struggled. However, some market commentators have said a correction in the performance of emerging markets may come on the back of rising property prices in China and inflation in India.
Mubasher's existing business, where revenue grew by 50 per cent last year, is headquartered in Bahrain and has subsidiaries in Egypt, Libya and the UAE. It expects revenue from expansion to initially come from retail investors.
Last week, the company launched an application for the BlackBerry smartphone giving brokers access to standard trading tools for the UAE markets. It plans to extend this to the iPhone and iPad in the next six months, Mr Kanawati said.