Mubasher Financial Services, the third biggest stockbrokerage in the UAE, warned the industry was headed for further consolidation as trading activity slides amid market turmoil.
Mubasher said it expected lower revenues after traded value on the Dubai Financial Market steadily dropped from Dh72.9 billion in January 2013 to Dh46.3bn in December 2014.
“We have to adjust the budget this year, everybody has to,” said Abdel Malik Kanawati, the chief executive at Mubasher, which traded Dh3.73bn on the DFM in December.
“The market is over-brokered, and those companies whose clients are mostly retail investors are going to be affected.”
Today there are 48 brokerage firms in operation, compared with 103 in 2010.
The capital markets industry was finally getting a reprieve after years of low volume, consolidation and layoffs. Brokerage companies finally turned the corner and statements showed they were becoming profitable.
Companies that had considered shutting down in 2013 decided to keep their operations running after a spike in volume at the beginning of last year, said Fathi Ben Grira, the chief executive at Menacorp, the top ranked brokerage on the DFM in 2014.
“The volumes we had in the first and second quarter of last year gave hope to a lot of brokerages. They invested, they tried to recruit, they thought they could survive,” Mr Ben Grira said. “The large companies have economies of scale, can generate profit, but for the smaller players, it will be tough.”
UAE stock brokerages made a profit of Dh151 million in the third quarter of last year, according to financial statements on the regulator’s website, compared with a profit of Dh99.69m in the third quarter of 2012.
Investors threw UAE markets into turmoil in the past two months as Brent crude has fallen near $45 a barrel from an average of $85 in October.
The Abu Dhabi Securities Exchange General Index has declined 12.1 per cent since October, while the Dubai Financial Market General Index has dropped 24.4 per cent in the same period.
halsayegh@thenational.ae
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