As many brokerages closed down after the 2008 financial crisis, Dubai's Mubasher Financial Services stayed put, and that investment appears to have paid off.
Mubasher Financial Services shows perseverance pays off
Another week, another award for Mubasher Financial Services. Its chief executive Malek Kanawati must have developed some serious upper arm strength from picking up so many glittering prizes over recent months.
In what has generally been regarded as the toughest of markets following the financial crisis, the trading firm appears to have recognised a business opportunity in the difficulties of others, and has grown market share and added new markets at an impressive rate.
Many firms in Dubai closed down their businesses because the volumes simply did not justify the costs. But Mubasher stayed in there, and that investment appears to have paid off in terms of market share and breadth of business.
“We do business with everybody: local retail and institutional investors, all the banks and the financial institutions of the region. We are often the brokers to other brokers in the UAE, as well as big banks across the Arabian Gulf and the bulge-bracket firms of Europe and the USA,” Mr Kanawati says.
After the shake-out in the regional broking industry, there are signs that the good times are back.
Volumes and share prices have recovered significantly this year, partly reflecting the recovery of the local economy, but also as a result of the upgrade of the UAE and Qatar to “emerging market” status by Morgan Stanley’s global index services in the summer.
“The effect on our business was immediate. There has been an all-round rally, and everybody is buying the region,” says Mr Kanawati . All that adds up to more and bigger commissions for Mubasher.
He sees regional potential in Saudi Arabia, where the process of opening up is gathering momentum.
“They will do it for the right reasons and at the right time,” he says.
He also sees opportunities in Bahrain, which perhaps has been the financial market most negatively affected by fallout from the Arab Spring.
“Bahrain is going to have some major offerings in the next six months,” he says.
Mubasher’s owner is the Saudi information technology conglomerate National Technology Group (NTG).
Back in the boom days of the early 2000s, when regional markets were on an apparently unstoppable upward trend, NTG charged Mr Kanawati (formerly a financial executive with the big Saudi bank Samba) with bringing its technology to bear on the region’s financial markets.
“There was barely the physical room to move on the stock market floors, the exchanges simply couldn’t cope with the growing numbers. We were the first to provide online, remote access to trading, in shares and other instruments,” he says.
Mubasher’s business was up and running in 2005. The firm remains based in Bahrain, but the bulk of its operations are now in the UAE, although with a presence in Egypt, Cairo and other regional centres.
The firm offers a full broking service, including equities, sukuk, commodities, foreign exchange, contracts for difference. It does not offer any open-ended funds but does trade electronically traded funds, says Mr Kanawati .
It gives investors access to some 35 markets, mostly across the developed world. So a UAE investor can sit online in Dubai and trade in shares or other instruments in London, New York or Frankfurt.
The business model is to select a preferred local broker, sign an agreement with that firm, and conduct business using Mubasher technology on the local market.
The strategy is ambitious: “We have access to 35 markets at the moment, but we plan to be in all developed, emerging and frontier markets in the short term. By the end of next year, I expect us to be in around 100 markets,” says Mr Kanawati .
He already has broker agreements, or is negotiating them, in markets including India, Pakistan, Sri Lanka and Libya. The big prizes are in Hong Kong and other Asian markets, but he is confident they will come shortly.
The UAE makes up a significant part of the Mubasher business, sometimes comprising as much as half its total broking levels. For the past few months, about half of all retail trades on the Nasdaq Dubai market have gone through the firm, although admittedly this is a comparatively small and under-traded exchange.
In the Emirates, it does trades via its own broking subsidiary, but also does business with another local broker, which Mr Kanawati declined to identify.
“It has taken us a comparatively long time to get to this position, and a big commitment in terms of management time, oversight and control, and of course a financial commitment,” he says.
A couple of weeks ago, Mr Kanawati picked up a gong at a slick ceremony at Burj Al Arab in Dubai, in the “outstanding financial market services” category from the Middle East Excellence Awards institute.
After, he took time to talk of the formula that has won Mubasher so many plaudits from the industry, and so many enviable glances from its peers in the broking businesses.
“It was the technology that inspired it, there is no doubt about that. Our owners have great expertise in technology, we have skills in the financial broking business. It was a no-brainer really,” says Mr Kanawati .
It looks like he will need some serious lifting practice in the next year.