x Abu Dhabi, UAESaturday 20 January 2018

Tide may be turning for Dubai bourse

Index trade volumes surge and prices rise as optimism returns.

A renewed sense of optimism reigned in local markets yesterday, and few stand to gain more than the Dubai Financial Market (DFM) Company if the mood persists. Shares in the bourse jumped more than 6 per cent yesterday to Dh1.76, as traders played the possibility of a post-Ramadan bounce and news over the weekend that Dubai World had reached a deal with virtually all of its creditors.

The DFM General Index (DFM) added a welcome 2.4 per cent bump in share prices, but the most significant figure for DFM Company was the 234 million shares traded. Before the financial crisis, it was not uncommon to see 300 million or 400 million shares change hands on the Dubai bourse on a given day, but the average daily volume of late has been closer to 50 million. One day late last month, the bourse saw less than 30 million shares traded.

Of course, fewer trades means DFM Company collects fewer commissions. The company's profits in the second quarter dropped 80 per cent to Dh25.9 million, from Dh128.2m in the same period last year. Not surprisingly, DFM shares had lost more than 40 per cent in the past 12 months before yesterday's gains. Perhaps the greatest indicator for DFM Company was not just the surge in volumes but the fact that it was the most active share on the exchange, responsible for more than 20 per cent of total volume. Investors believe other investors are coming back.

The low liquidity in Dubai over the past year was hardly an anomaly as investors worldwide remain cautious about the state of the economic recovery. But events such as the Dubai World settlement provide added clarity about the recovery's progress and give investors at least some confidence that a "normal" market is possible again. As a further boost, it appears DFM Company will be one of the stocks listed on the FTSE Global Equity Index Series, a move that should raise its profile among international fund managers. For the embattled bourse, the tide appears to be turning.