SCA halves daily loss limit on markets and enables share buybacks to support investors

The UAE's Securities and Commodities Authority halved the limit that causes trading to halt once losses hit a specific level to support investor confidence amid increased selling activity in the wake of the coronavirus outbreak.

The loss thresholds triggering trading suspension were reduced to 5 per cent from 10 per cent, the market regulator said in a statement Thursday on state news agency Wam and Twitter.

The SCA said it is facilitating share buybacks for listed companies to further support local stock markets without “adversely affecting the trades taking place”. Short-selling practices “are not in place in UAE capital markets” it said.

All listed companies have also been instructed to hold their general assembly meetings remotely via a secure remote e-voting system, the SCA said.

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The UAE regulator’s move comes as the coronavirus pandemic wiped $20 trillion ($73.4tn) from markets worldwide, after disrupting supply chains, global trade and severely curtailing the airline and travel industries.

In March, Boursa Kuwait was one of the first in the region to reduce the loss limit for trading to 5 per cent after the Kuwait Premier Market hit a 10 per cent down-limit three times in a period of two weeks.

A massive sell-off in US stocks also triggered circuit breakers – limits that halt trading for 15 minutes if the markets slump by 7 per cent or more- to kick in multiple times within a week last month, as investors engaged in a sell-off fearing a recession.

The coronavirus has infected more than 941,000 people globally and killed over 47,000 as of Thursday, according to Johns Hopkins University that tracks the outbreak. About 196,000 people have recovered.

Globally governments have also released more than $7 trillion in economic stimulus packages to help businesses survive the economic fall out.

The US rolled out an initial $2tn stimulus package, the largest in the country's history, to soften the impact of the coronavirus and shore up the economy. Washington is currently reviewing an additional wave of packages.

The UAE is releasing Dh126 billion stimulus to support the economy while the country's central bank urged lenders to provide payment holidays on loans for customers affected by Covid-19.