The UAE’s exchanges are the region’s weakest performers to date this year.
The Dubai Financial Market (DFM) ranks as the worst performing Middle East benchmark this year, losing more than 14 per cent of its value. The Abu Dhabi Securities Exchange (ADX) is the second-worst, dipping about 6.5 per cent.
Apart from the bounce in response to the Dubai World $23.5bn debt restructuring proposals in March, both the DFM and the ADX have failed to generate active trading volumes.
“The UAE markets are trading at an all-time low as they face both a lack of interest and buying power,” says Wael Atta, senior technical analyst at Egypt-headquartered investment bank HC Securities & Investment.
Indeed, the markets have received little interest from foreign funds and investment houses.
Most notably, European investors remain cautious on the back of Greece’s debt woes after it received a $146.2bn bailout from the European Union and the Washington-headquartered International Monetary Fund (IMF).
Fears that Greece’s problems could trigger a European debt crisis mean negative sentiment has continued to prevail.
The lack of a local catalyst to stimulate trading has compounded the problem. The majority of firms reported either a contraction in earnings or losses in their first quarter financial statements.
Trading has been depressed further in recent weeks by the Dubai Holding revelations.
At the end of May, Dubai Holding subsidiary, Dubai International Capital, asked for a three-month extension on its $1.25bn syndicated loan repayment due the following month.
Fellow subsidiary, Dubai Holding Commercial Operations Group, is currently trying to negotiate a rollover of a $555m loan and announced on 1 June, it may resort to asset sales to try and reduce its debt.
On 6 June, the DFM slumped to a 14-month closing low, while recent trading volumes have been less than half the 50-day average.
Meanwhile, at the close of trading on 7 June, the ADX ended lower for an 11th session in the previous 12 days, dipping 0.3 per cent to 2,531 points.
The UAE’s initial public offering (IPO) market also has yet to stage a revival, with not a single company having listed so far this year.
At the end of May, investment bank Shuaa Capital announced it is acting as the lead manager for the IPO of an Abu Dhabi company, which is expected to raise more than $272.3m, and was due to be launched in early June, but there has since been no update on its progress.
Elie Ghanem, head of market and product development department at ADX, says, “In the best case scenario, we could expect to see three IPOs in the UAE this year.”
“There are currently three lead managers, who are talking about launching IPOs before the end of the year,” says Ghanem. “But whether they go ahead will depend on the circumstances – such as if there are more problems with sovereign debt or not.”