x Abu Dhabi, UAETuesday 25 July 2017

Finance House offer fails to move market

Company's stock is only traded once, in a transaction involving 250 shares.

The first day of trading for Finance House since the company announced it was making its shares available to foreign investors was less than a runaway success - the stock was traded only once, in a transaction involving just 250 shares. The muted response was not all that surprising, as shares of the Abu Dhabi-based company have experienced thin volumes of late and have not been heavily traded since February.

Finance House's average daily trading volume over the past 12 months has been more than 134,000, but in recent days the volume has been mostly below 5,000. That lack of liquidity is one of the primary reasons behind the opening to foreign investors. "We are delighted to open the company's shareholding to foreign ownership in response to repeated requests by the investing community over the past five years," said Mohammed Alqubaisi, the chairman of Finance House.

The share price reached as high as Dh6.61 in March but has dropped more than 40 per cent. It closed at Dh4.45 yesterday. The drop in Finance House shares shows one of the perils of the low trading volumes that local bourses have seen lately - prices often tend to drop sharply as those looking to sell make their holdings available at a level that will attract buyers. The company's move to make its shares more widely available is a sign that the management is keenly aware of the recent fall-off in trading volumes. The change to include foreign investors still needs to be approved by the Emirates Securities and Commodities Authority.

Finance House made the announcement on the same day it reported a second-quarter profit of Dh62.1 million, down slightly from Dh63.2m in the same quarter last year. The company said its customer deposits grew 21 per cent in the most recent quarter to reach Dh1.48 billion. It also said its investments had "stood up very well in a rather challenging credit environment", although it noted they had "gyrated in tune with local and regional markets".