Dubai market gains on institutional investment

08 July 2015

Amlak volatility drives high trading volumes

  • Dubai Financial Market gains 4.2 per cent in June
  • Institutional investors’ net inflow was $167m
  • Volume of shares traded soared 48.4 per cent

The Dubai Financial Market (DFM) general index gained 4.2 per cent in June to reach 4,086.8 by the end of the month.

The surge was driven by institutional investment, with net investment over the month hitting AED613m ($167m).

The data suggests that shares on the DFM are increasingly seen as long-term rather than speculative investments. The development, following the DFM’s upgrade to emerging market status in 2014, should stabilise the market and increase liquidity.

Net investment from foreign investors was AED312m, and their trading made up nearly half of overall transactions.

Trading volumes also increased, with the number of shares traded shooting up 48.4 per cent to 14.2 billion shares, worth a total of AED 26.1bn. This bucks the usual seasonal trends, where trading slows during Ramadan and the summer months.

The high volumes were in large part due to the resumption of trading in the local Amlak Finance shares, suspended since 2008 due to unsustainable debt. It accounted for 4 billion of the traded shares, as prices showed high volatility over the month. On 30 June, the company’s share price reached AED2.78, a 172.5 per cent increase from 2 June, when trading resumed.

Consumer and discretionary shares rose the most, by 13.3 per cent, as investors anticipated high consumer spending in Ramadan. Services was the second-highest gainer, up by 9.3 per cent.

Industrial shares fell by 9.8 per cent.

Overall market capitalisation rose by AED13.7bn, or 3.8 per cent, to reach AED369.4bn at the end of June.

This was despite a slow first half for share listings. So far in 2015, only the local Damac Properties has listed shares, which were previously traded in London. Companies have been discouraged from setting initial public offering (IPO) dates by volatility caused by falling oil prices.

An oil price stabilisation and a strong stock price performance may encourage interested companies, such as the local Daman Investments, to go ahead with IPOs.

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