UAE brokerage firms hope for higher volumes next year

Look Back 2012: Brokerage firms in the UAE are unhappy with volume levels, despite an almost 30 per cent from last year's $57 billion.

The Abu Dhabi Securities Exchange General Index has risen 9.5 per cent since the start of the year. Delores Johnson / The National
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UAE stock market trading volumes are expected to reach Dh70 billion (US$19.05bn) for the year, representing a 22 per cent increase on 2011.
Although a marked increase from last year's Dh57bn, the figure has been met with mixed feelings by brokers who had expectations of volumes nearer to those reached in 2010.
"I can't say we are happy. Last year we had crumbs and this year we had one-third of a piece of bread," said Fathi Ben Grira, the chief executive at Mena Corp, an Abu Dhabi investment company.
"Despite seeing an increase in new accounts from foreign and [Arabian] Gulf investors with large sums," Mr Ben Grira said trading volumes are still considered low.
Combined, the UAE's bourses, the Abu Dhabi Securities Exchange and Dubai Financial Market, reported the total value of trading reached Dh105bn in 2010.
Brokerage firms have been suffering from depressed trading volumes after unrest in parts of the Middle East and North Africa region last year drove away investors. But trading activity and market interest improved this year, bringing some relief for their income statements.
Tumbling volumes forced 23 brokerages to shut down in 2011. Many independent securities companies have had their capital replenished and maintained the bare minimum staff of a trading manager and two brokers as required by the market regulator. There are now 50 brokerages in operation from a peak of 103 more than two years ago.
The Abu Dhabi Securities Exchange General Index has risen 9.5 per cent since the start of the year, while the Dubai Financial Market General Index has advanced 18.7 per cent in the same period.
"If we can continue this momentum next year, then we can consider 2012 the bottom for our markets," said Mohammed Ali Yasin, the managing director at National Bank of Abu Dhabi's brokerage arm.
The UAE is classified as a frontier market by MSCI, whose indices are tracked by investors with about $7 trillion in assets. It has failed to secure "emerging markets" status for a fourth year.
"We are looking for the regulator and the markets to be taking the issue more seriously," Mr Ben Grira said. "The UAE markets are classified as frontier. Even Casablanca is considered [to be in] an emerging market."
Late last year, the markets introduced a delivery-versus-payment system (DVP), a key requirement for a change in status according to MSCI. A DVP procedure requires payment of a security to occur at the same time the security is delivered.
"We can't say a lot has happened except the DVP," said Mr Ben Grira.
It is yet to be determined how recently introduced regulations from the Securities and Commodities Authority governing market-making and short-selling activity will be put into practice.