x Abu Dhabi, UAETuesday 25 July 2017

Losses widen at DFM Company

Dubai Financial Market Company, the only Gulf Arab stock market to sell shares to the public, reported a 90 per cent plunge in the third quarter yesterday.

Dubai Financial Market Company (DFMC), the only Gulf stock market to sell shares to the public, said third-quarter losses tripled as trading volumes reached historic lows.

Losses widened to Dh9.28 million (US$2.5m), compared with a loss of Dh2.95m in the same period a year ago.

"The constant drop in trading values overshadowed the company's revenue," a company statement said.

The value of trading fell by about half in the first three quarters to Dh27.6 billion, and 42.3 per cent in the third quarter to Dh5.2bn, after the toppling of three Arab leaders this year and volatility in global markets crushed investor confidence, despite high oil prices.

Revenue, comprising trading commissions, investment and other income, reached Dh145.1m for the first nine months of the year, down from Dh205m in the corresponding period last year.

"Everyone thought 2011 was a recovery year for the UAE markets, with fund managers aligning themselves for a rally in the beginning of the year," said Marwan Shurrab, the chief trader at Gulfmena Investments in Dubai. "But then came the headwinds from the Arab Spring and Europe's debt crisis, which has continued to pressure the market and turnover."

Amid low trading volumes, Deutsche Bank pulled Christopher Laing, its head of equity capital markets for the Middle East and Africa, back to London after three years in Dubai.

Nomura recently closed its Dubai equity research unit, although some leading regional companies will continue to be covered by Nomura analysts based in London. HSBC announced last week that it was closing its retail equity brokerage in Dubai.

Shares of DFMC fell 1 per cent to 96 fils at the 2pm close in Dubai yesterday. The stock has declined 35 per cent this year compared with a 16.9 per cent decline in the benchmark Dubai Financial Market General Index.

DFMC signed agreements this year to sell market data to 14 local, regional and international data vendors and applied listing fees.

In June, the international index provider MSCI delayed its decision on whether to upgrade the UAE to emerging-market status from its current frontier-market status. About $3 trillion of funds are benchmarked against the index compiler's gauges.

"We believe the UAE's inclusion in the MSCI Emerging Markets Index would be positive for the DFM, as it could help lift valuations and trading velocity towards emerging markets average levels," said Rahul Shah, an analyst at Deutsche Bank, in a note to clients.

Local companies are trading at eight times earnings this year, compared with 11 and 12 times for Qatar and Saudi Arabia, respectively, and 15 times for emerging markets generally.