ADX chief denies alleged trading investigation into Sorouh and Aldar

The head of Abu Dhabi's stock-market, Rashed Al Baloushi, denied yesterday it had launched an investigation into unusual share price movements of Aldar and Sorouh.

The chief executive of the Abu Dhabi Securities Exchange, Rashed Al Baloushi, called news of the inquiry an "unfounded rumour". Delores Johnson / The National

The head of Abu Dhabi's stock-market denied yesterday it had launched an investigation into unusual share price movements of Aldar and Sorouh prior to Sunday's announcement of a planned US$15 billion (Dh55.09bn) merger.

The chief executive of the Abu Dhabi Securities Exchange (ADX), Rashed Al Baloushi, called news of the inquiry an "unfounded rumour".

The exchange "carries out daily routine checks on all share trading activities through highly sophisticated electronic surveillance systems which can detect any instance of share trading violations," Mr Al Baloushi said in an email statement.

"The exchange does not perform any investigations unless it was highly confident that trading law have been violated, which did not happen in the case of Aldar and Sorouh share trading."

The head of surveillance operations, Abdullah al Naimi on Monday told The National he was "very suspicious" as the two stocks traded in lockstep days ahead of the announcement of the proposed merger that would create a property giant with assets worth $15bn.

The shares of Aldar and Sorouh both closed at identical prices on three consecutive days - Dh1.11 on Wednesday, Dh1.13 on Thursday and Dh1.22 on Sunday - before the companies announced they were weighing up a merger.

Prior to this, Aldar had been trading at a premium of 10 per cent to its smaller rival Sorouh.

Mr Al Naimi has said investigations began on Sunday morning into why the share price movements were identical.

Analysts and investors remained puzzled.

"There is nothing wrong to say we monitor the movement of stocks," said Mohammed Ali Yasin, an independent analyst in Abu Dhabi. "However, the question that still begs is: in the three days prior to the announcements, why at those levels and how come they are moving before the market?"

Both stocks closed at Dh1.34 on Monday, but yesterday Aldar rose to Dh1.36, while Sorouh closed at Dh1.37.

The shares should not be trading at the same price, said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi.

"There are different valuations, what we see as upside of different entities. But in our mind they shouldn't be trading lockstep.

"Right now we don't know what Aldar and Sorouh have in mind in terms of exchange ratios in terms of shares," he said.

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