x Abu Dhabi, UAEFriday 19 January 2018

NASDAQ stocks seek their share

Merger with DFM has paid no real dividends for 14 equities as yet.

More than half a million retail investors are responsible for most of the trading activity on the Dubai Financial Market.
More than half a million retail investors are responsible for most of the trading activity on the Dubai Financial Market.

The 14 equities traded on NASDAQ Dubai are still waiting for the expected boost three weeks after the bourse's merger with the Dubai Financial Market (DFM). DFM acquired two thirds of NASDAQ Dubai in May and the two exchanges began sharing a trading platform on July 11. So far volumes for NASDAQ Dubai shares are lower than they were in the month before the tie-up, and several companies are exploring measures to reverse the trend.

The ports operator DP World continues to dominate trade volume on NASDAQ Dubai, followed by the interiors contractor Depa and the jewellery retailer Damas. Since the merger, the average traded volume for DP World is 3.9 million shares, compared with an average of 6.5 million shares since the beginning of last month. Its stock price has climbed 11.3 per cent since trading on the DFM, with 6.4 per cent of that coming in a single rise on Tuesday when the company posted strong first-half growth figures.

More than 500,000 retail investors are responsible for most of the trading activity on the DFM. Analysts say one reason for the low volumes on NASDAQ Dubai shares is that the traders are not yet familiar with the companies. "They are comfortable in trading the more familiar DFM stocks they have known for years," said Chahir Hosni, the equities sales manager at EFG-Hermes in Dubai. The lack of liquidity also makes it difficult for speculators and day traders. But a spokesman for NASDAQ Dubai said the percentage of trades from retail investors was rising, to 25 per cent in the second week after consolidation from 9 per cent in the first.

"We are pleased that the trading platform and all other systems are performing efficiently and as planned," the spokesman said. "We look forward to an increase in volumes after Ramadan and as UAE markets recover their vigour." Depa shares have traded only seven days in the past three weeks, with average daily volume of 344,317 - close to a drop of two thirds from the 967,385 since the start of last month.

They also lost 6.7 per cent of their value, leading Mohannad Sweid, the chief executive of Depa, to say he was looking at ways to attract more liquidity. Mr Sweid said Depa was seeking approval to re-denominate its ordinary shares from dollars to dirhams, and undertake a two-for-one stock split. Brokers say other companies are exploring similar options. "Converting dirhams into dollars and again into dirhams in your trading accounts makes the cost of trading go up," said Saad Chalab, an institutional trader at AlRamz Securities in Abu Dhabi. "Investors lose on the spread in converting currencies twice."

The consolidation of the bourses, which still operate under separate regulators, has excited some private equity companies. Several said recently they were intrigued by the possibility of listing on NASDAQ Dubai, where a company was required to float only 25 per cent of its shares, and still be traded on DFM. But if a lack of liquidity remains an issue for NASDAQ Dubai equities, those firms may have second thoughts about looking at this exit route.