UAE stock markets buzz with activity on day one of MSCI upgrade

The Dubai Financial Market General Index has jumped 50 per cent this year. Pawan Singh / The National

It was a scene that one investor likened to Ali Baba’s cave as day traders returned in numbers to the Abu Dhabi Securities Exchange.

The UAE bourses were yesterday reclassified by the index compiler MSCI as emerging markets – opening up the country to a much broader universe of global investors.

The Abu Dhabi Securities Exchange General Index is up 20.2 per cent this year, while the Dubai Financial Market General Index has jumped 50 per cent in the same period.

Trading on the broader market was lacklustre yesterday, concentrated in select stocks after both bourses recorded their best day of the year on Thursday – their last day of trading before being included in the index.

But that did not dampen the enthusiasm of some of the newer arrivals to the world of day trading.

Mohammed Abu Musa opened an investor account five days ago, after his friends told the public relations manager there were profits to be made from the stock market.

"There was all this noise about the inclusion of MSCI into the emerging markets index, as if we're going to Ali Baba's cave and finding all the treasures," he said, referring to the character that finds bags of gold coins in a cave from the One Thousand and One Nights.

He bought two stocks on leverage, Arabtec and Dubai Islamic Bank, joining the herd of retail investors that seek to profit on speculative trading.

Retail investors were preoccupied with Abu Dhabi’s Eshraq Properties, which touched its maximum price threshold, hovering at 14.8 per cent. “Limit up,” shouted Laham Shlash, a day trader, as his friends darted to their screens. “I’m trying to recover some of the losses I made during the correction last month,” the trader said.

The DFM was also busier than usual yesterday according to traders.

"I am new to the stock market," said Moosa Obaid from Oman. "I have only been coming to the DFM for two weeks, because of the MSCI upgrade. We are awaiting the result, but not in the short term. I think this will take a little time to flourish. We are trying our luck."

New liquidity from small investors has become a boon for stockbrokers who have survived more than four years of continuous job cuts after share prices tumbled and trading volumes collapsed.

“Every day we receive not less than 10 new clients, applications for new investor numbers, who want to trade the market,” said a broker in a booth on the floor of the exchange.

Before the financial crisis, the booths of the exchange would buzz with the urgent chatter of brokers as traders launched their buy and sell orders using paper aeroplanes over the heads of rival investors jamming the trading room floor.

But over the past five years the number of brokerages in operation has halved to just under 50.

There were at least 50 traders on the floor yesterday, a marked difference from just three or four in recent years. “I come here to spend my time, even if I don’t plan to buy or sell that day,” Mr Shlash said.

Booths that once had their lights dimmed have now been taken over to expand office spaces for brokerage houses that have survived following years of financial austerity.

In September, stock brokerages made a profit for the first time since the crisis, reversing a trend of restructuring and losses in the years before. They made Dh64.2 million in the second quarter of last year, compared with a loss of Dh36.9m a year earlier, according to data on the market regulator’s website.

As summer and Ramadan approach, traders are expecting activity to calm.

“After all this liquidity from MSCI, there will have to be a major event to trigger that kind of impact,” Mr Shlash said. “It will be quieter.”

* With reporting by Andrew Scott

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