UAE regulator under pressure

03 July 2014

The dramatic slump in Arabtec Holding’s share price shows more action is needed to tackle suspicious behaviour on the stock markets

The Securities & Commodities Authority (SCA), which regulates the UAE’s stock markets, is under fire after the spectacular rise and fall of local contractor Arabtec Holding’s share price.

The stock’s value quadrupled within the space of just five months before diving back during the weeks surrounding the departure of managing director and CEO Hasan Ismaik, along with several key personnel and dozens of other employees who were connected to him.

The saga has attracted heavy criticism from investors, who claim that suspicious activity had pushed up the stock for months. While ultimately it is the investors’ responsibility to make decisions based on their own analysis and judgement, they are supposed to receive information – even if the news is just rumours – at the same time as anyone else, and enough details on official announcements to be able to make sound decisions.

During Arabtec’s five-month surge, its share price sometimes appeared to spike weeks or days before news became public knowledge. On most occasions, the regulator failed to demand details. The SCA also failed to act on reports that Ismaik told Arabtec’s shareholder meeting on 30 April that he targeted a share price of AED14 ($3.8), which many saw as an open attempt to manipulate the markets.

It did not help that some brokerages played a part, recommending speculative stocks, including Arabtec’s, without warning investors about the risk involved. As a result, many investors have seen their money disappear.

It is not uncommon for the lines between speculation and suspicious behaviour to become blurred in the UAE and in other regional markets.

But now that foreign investors all have their eyes on the region’s markets following the upgrades by US-based index compiler MSCI, it is time for regulators to step up their game.

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