By Arif Sharif - Sep 12, 2013 7:11 PM GMT+0400
Dubai’s biggest brokerage plans to almost double staff over the next year, counting on growing demand for the emirate’s equities, as trading in the world’s most-volatile stock market climbs to a three-year high.
Mena Corp Financial Services LLC, which traded the most shares in Dubai since April among 48 brokerages tracked by the exchange, will boost the number of employees to 50 from 27, Managing Director Nabil Al Rantisi said by phone Sept. 10. The 100-day moving average of stocks traded in the emirate surged to 696 million dirhams ($189 million) today, the highest level since February 2010, data compiled by Bloomberg show.
A visitor watches financial data on screens inside the Dubai Financial Market in Dubai. Photographer: Duncan Chard/Bloomberg
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The DFM General Index tumbled 13 percent in two weeks from a five-year high reached Aug. 25 on mounting concern the U.S. would carry out a strike on Syria and hurt Dubai’s economy, which is dependent on revenue from tourism and trade. The gauge jumped 9.2 percent in three days, bringing this year’s gain to 56 percent, as U.S. President Barack Obama said he would pursue a proposal by Russia to have Syria surrender its chemical arms. The swings made Dubai’s index the most volatile in the world in the past month, data compiled by Bloomberg show.
“People still believe that Dubai is a safe haven,” Rantisi, 36, said by phone. “We are still in hiring mode. The market looks good in the medium to long-term.”
Trading Momentum
The DFM’s advance this year, the biggest among gauges in the world’s 50 largest equity markets, has been helped by MSCI Inc. (MSCI)’s June decision to raise the United Arab Emirates to emerging-market status and an improving economy. Gross domestic product will grow 4.6 percent, on average, between 2012 and 2015, more than twice as fast as the previous four years, government forecasts show.
The reclassification of benchmark indexes in the U.A.E., a federation of seven emirates including Dubai, stoked bets foreign investors would channel more money into the local exchange. MSCI, whose equity indexes are tracked by investors with about $7 trillion in assets, will upgrade the gauges from frontier status in May following five years of review.
“There has been an increase in western institutional interest,” Julian Bruce, the head of institutional trading at EFG-Hermes Brokerage UAE LLC, said by e-mail Sept. 10. “Renewed confidence has not only brought new buyers into the market,” it has pulled in investors who were on the sidelines, he said.
Higher Volatility
Before Dubai’s index tumbled in August, stocks were trading at the highest estimated price-to-earnings ratio since 2008. The level rose to almost 15 on Aug. 28, before dropping to 13.6 today, exceeding a multiple of 11.4 for the MSCI Emerging Markets Index.
The gauge’s 30-day volatility, a measure of price fluctuations, was at 41.6, near the highest since January 2010 and the most among 72 indexes tracked by Bloomberg. That’s more than 10 points above benchmark measures in Japan and the Philippines. The DFM General Index (DFMGI) advanced 0.3 percent to 2,538.56 at the close in Dubai, compared with a decline of 0.1 percent for the MSCI Frontier Markets Index.
Dubai’s gauge swung between gains of as much as 1.9 percent and a loss of 2.1 percent before closing 0.4 percent higher yesterday as Syria rebels counting on a U.S. strike warned of an escalation in violence in the absence of more support. While Obama said Sept. 10 that he’s prepared to pursue a diplomatic solution with Russia, he also repeated his arguments justifying the use of force to deter any future use of chemical weapons.
“If we see a diffusing of the Syrian situation it will be welcomed by all and clearly confidence will return,” EFG-Hermes’ Bruce said. “Any further upside will be governed by events such as the third-quarter results to see if this recovery is sustainable and can be maintained.”
Reaping Rewards
Some of the U.A.E.’s 48 brokerages have reaped the benefit of higher volumes. Mena Corp reported a profit of 8.7 million dirhams in the six months through June, compared with a loss of 2.8 million dirhams a year earlier. Half-year net income at Al Ramz Securities LLC, the second-biggest brokerage by trading value, jumped to 17.6 million dirhams from about 120,000 dirhams in the period.
This year’s average daily trading value has more than doubled from 2012 to about 530 million dirhams. That compares with a record 1.5 billion dirhams in 2007, before Dubai’s housing market crashed, with home prices tumbling more than 60 percent from a 2008 peak during the global financial crisis.
Investor Confidence
Property prices in Dubai, home to the world’s tallest tower and artificial islands, have risen almost 40 percent over the past year, according to Standard Chartered Plc (STAN) estimates. The emirate’s growing population, improving economy and status as a haven amid regional political uprisings are driving the rebound, the bank said in a report on Sept. 4.
Second-quarter profit at Emaar Properties PJSC (EMAAR), Dubai’s biggest publicly traded company, rose 10 percent, beating analysts’ estimates and helping drive a 53 percent surge in the stock this year.
“Equity markets move in cycles and the market went through a very tough down-cycle during the crisis,” Mohammed Ali Yasin, managing director at Abu Dhabi-based NBAD Securities, said by phone yesterday. Trading volume on Sept. 10, which was almost four times the 12-month daily average, “confirms the confidence of investors in the viability of our equity markets,” he said.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net
