Opening day on the newly merged Dubai bourse was marked by considerable confusion and, as a result, little trading.
Glitches mar merged Dubai bourse debut
Opening day on the newly merged Dubai bourse was marked by considerable confusion and, as a result, little trading. Investors struggled to understand the unified trading platform and brokers said they were having difficulty getting trades processed. "We haven't had enough information about this," said Zakariya Assar, who was trading on the floor of the Dubai Financial Market (DFM). "Nothing has been clear, not even from what we read in the newspapers … Plus the large screen that usually shows us what's going on in world markets is off."
The DFM, however, did not agree with traders' assessments of the merged system. "Nothing went wrong," said Maryam Fikree, the chief operating officer of the DFM. "Everything went smoothly; we received no complaints. Systems ran in an official way, including the trading system." Shares of companies listed on the DFM and NASDAQ Dubai were traded on a common platform for the first time yesterday, the result of the DFM's purchase of NASDAQ Dubai. The union is an effort to bring more liquidity into the region's financial markets as well as to inject some life into NASDAQ Dubai.
On NASDAQ Dubai, only eight trades were recorded yesterday and those involved only two companies - the ports operator DP World and the interior contractor Depa. DP World, the bourse's flagship stock, saw only 93,000 shares change hands, compared with a daily average of 6.6 million shares over the preceding 50 trading days. For Depa, only 21,000 shares changed hands, against a daily average of 550,000 shares over the preceding 50 days.
The volume for the DFM General Index was just below 50 million, less than half its daily average of 108.9 million for the preceding 50 days. The consolidation was designed to make it easier for investors to trade stocks on both exchanges, but it appeared that not all the necessary steps were in place. Brokers reported difficulty making transactions, apparently because of changes in the way shares were allocated.
Under the new system, investors will be given a national investor number that enables them to access their trading accounts directly. "We tried to sell shares but couldn't," said Hatem Alatabani, the managing director of Makaseb Islamic Financial Services. "From what we heard, they were a result of custodian issues." Mr Alatabani, whose company is a local brokerage that depends on larger firms to trade shares listed on NASDAQ Dubai, speculated that third-party custodians had not yet transferred all shares to the new DFM platform.
Some investors said they were also confused by the way share prices were presented on the new unified trading screens. "You can't see anything about DP World; you have to go to the DFM website," said Kishore Kumar, another trader. "If I want to trade in DP World, I can't with my local account. I have to set up a separate account." Mohamad Mohab, a dealing manager assistant at Premium Financial Services, a brokerage firm, also said traders were under the impression they could buy and sell shares using the same account, but could not do so yesterday.
A spokesman for NASDAQ Dubai said investors should be able to trade stocks on both exchanges easily once they had registered for a national investor number. In a statement, Jeff Singer, the chief executive of NASDAQ Dubai, said: "We are delighted to have achieved a successful migration to DFM's trading platform. This has been a joint effort involving many of our market participants and we are grateful for their support. We now look forward to higher trading volumes in due course."
In December, DFM bid US$121 million (Dh444m) for NASDAQ Dubai, with NASDAQ OMX to swap its 33 per cent holding in NASDAQ Dubai for a 1 per cent stake in the DFM. By May, the DFM had acquired two thirds of NASDAQ Dubai, according to a statement posted on the website of WAM, the state news agency. "DFM will acquire the remaining third in due course," the statement said. Despite the confusion yesterday, Mr Mohab said he was confident the new system would eventually become "the norm" for investors.
"Unfortunately, trading volumes weren't good," he said. "Yesterday [investors] were confused. Nobody explained the consolidation to them. But before long, it will see higher trading. The reason for the low volume in the market is the summer holiday." @Email:firstname.lastname@example.org @Email:email@example.com