Market response speaks volumes

Expats are sending savings home rather than investing in Emirates.

Market watchers have been complaining for several months about a serious lack of activity but the survey delivers sobering confirmation: only 7 per cent of respondents say they invest in the local stock market. Loredana Alexa, 30, who moved to Abu Dhabi this year, says she has considered putting money in the Abu Dhabi Securities Exchange (ADX).

But when Ms Alexa compared it with the UK and eastern Europe, where she is from, she concluded "Abu Dhabi is definitely riskier". She opted to send her money home to invest instead. Almost 30 per cent of respondents agree the main deterrent to buying stock here is the risk. That is a far cry from several years ago when stock prices of UAE companies seemed to defy gravity and expatriates and locals alike rushed to capitalise on their rapid growth.

"Booms attract more liquidity and improve sentiment, and then people see others making money and it pushes markets even further," says Mohammed Ali Yasin, the chief executive at Shuaa Securities based in Dubai. "None of that has happened in the past two years." The number of shares traded on local markets has fallen greatly this year. The average daily trading volume on the ADX this year has been about 66 million shares compared with 149 million last year, while on the Dubai Financial Market (DFM) the average volume has dropped to almost 170 million from 445 million.

"The market is going through a cleaning-up process," Mr Yasin says. It is also telling that of the possible responses, the smallest number, 5 per cent, say they made their decision because they could not find shares they wanted to buy. Instead, they were worried about the volatility (22 per cent), profitability of the shares (19 per cent) and size of the markets (15 per cent.) That indicates at least a sizeable percentage of residents will be interested in investing if the markets stabilise.

But for many expats, the modus operandi is to earn money here and send the savings home, as Ms Alexa does. The option of investing locally is hardly considered. So it is not surprising the most common response for why people do not invest in the local markets, given by 37 per cent of those surveyed, is "I know nothing about it". [e-mail] [e-mail]