UAE brokerages suffer as traded value on the ADX and DFM shrink. Active companies in the industry posted losses amounting to more than Dh100 million for the quarter.
Brokerages in the UAE hit hard in first quarter
UAE brokerages collectively lost more than Dh100 million (US$27.2m) in the first quarter and almost 90 per cent were in the red as they continued to struggle with flagging volumes and declining values.
There are 64 brokerages listed by the Emirates Securities and Commodities Authority (SCA) as active, down from 90 at the end of last year, and 56 posted losses in the quarter.
Net consolidated losses for the quarter increased by 24 per cent to Dh102m, from Dh82m in the same period last year, according to financial statements on the SCA website.
"Its not just that the losses are huge. It is the fact that the losses have been continuing for three years. Brokerages are a function of the markets, which have dropped significantly," said Mohammed Ali Yasin, the chief investment officer at CAPM Investment in Abu Dhabi.
Traded value on the UAE bourses has reached Dh36 billion so far this year. At this rate, they would end the year at about Dh70bn. By comparison, in 2008 the bourses traded a combined value of Dh530bn.
Dubai's benchmark index has lost more than 80 per cent since reaching a high in 2005. The Abu Dhabi Securities Exchange General Index has declined almost 50 per cent during the same period.
Emirates NBD Securities was the biggest loser in the quarter, dropping Dh5.8m from a profit of Dh1.27m in the same period last year.
HSBC, among the leading brokerages in the boom times, posted a loss of Dh2.1m in the first quarter, down from Dh3.2m in the previous year.
EFG-Hermes said its net income in the quarter declined to Dh10,477, down from Dh79,524 in the same period last year. Rasmala Financial Brokerage said its net loss narrowed to Dh618,517 from Dh1.3m last year. The brokerage said it shut its retail arm last month to cut costs.
The UAE is under review for an upgrade by the index firm MSCI, which is expected to announce next week whether it considers the country an "emerging" or "frontier" market. An upgrade could open up the country's bourses to added liquidity and drive index fund investments.
"The MSCI inclusion [would be] positive for the UAE markets, but it is only another tick box in the things-to-do list to improve traded value and investor sentiment," Mr Yasin said. "International investors will not increase volumes if the local investor largely remains an inactive player."
The Abu Dhabi Securities Exchange General Index rose 0.65 per cent to 2,761.48 yesterday as investors bought large-cap stocks on speculation the country would be upgraded. The Dubai Financial Market General Index closed flat at 1,600.98 points.