Brokerages expected to rise on tide of foreign capital

05/10/2014 18:11 AST

An influx of foreign capital is expected to lift volumes on the UAE’s stock markets to pre-financial crisis levels and help brokerages earn record revenues.

The bold prediction for the final quarter of the year comes amid a slew of new listings that has stimulated trade in recent weeks.

“Frankly, 2014 is the best year for brokerage companies since 2008 in terms of revenues,” says Mohammed Ali Yasin, the managing director at NBAD’s brokerage arm. “If traded volume continues it will be the highest on record, and that’s why we see brokerages either opening or expanding their business.”

Emaar Properties spun off its malls unit in an initial public offering on Thursday. It raised US$1.6 billion from the share sale, with the shares priced at Dh2.9, the top of the pricing range in a book-built IPO, the company said. It gained 12 per cent on its first day of trading. Emaar also has plans to spin off its hospitality business “in the next few months”, said its chairman, Mohamed Alabbar. Other companies are also slated to go public in the near future – the property developer Damac and the private equity house Gulf Capital.

The hype over the public offerings slowed traded volumes last month, with investors subscribing to the Emaar Malls Group IPO, but brokers expect that the company will bring in plentiful trade now that is has listed.

“Markets should pick up in the coming quarter,” said Nabil Farhat, a partner at Al Fajer Securities, which trades stocks on the Abu Dhabi Securities Exchange and Dubai Financial Market. “There’s also a new addition, Emaar Malls Group, which will be the latest product to trade. It’s positive for our industry.”

The UAE bourses traded a combined Dh436bn this year up to the end of last month. That is almost double the Dh242bn traded all of last year.

“I think we should be able to close 2014 closer to Dh600bn,” Mr Yasin said. “The highest figure was Dh537bn in 2007.”

Brokerages are enjoying their first year of consecutive quarters of profitability since the 2008 global financial crisis. Many companies shut down as liquidity dried up and investor appetite waned after Dubai’s equity index lost more than 50 per cent of its value.

“The years of consolidation are over,” Mr Farhat said. “The market has picked up and brokerage houses are making money. Whoever survived is now enjoying the fruits of years of patience and losses.”

The Abu Dhabi Securities Exchange General Index is up 19 per cent so far this year, while the Dubai Financial Market General Index has gained 12 per cent over the same period.

The rally has been fuelled by the inclusion of the UAE stocks into MSCI’s Emerging Markets Index and Dubai’s Expo 2020 win. Abu Dhabi and Dubai stocks were also included into the emerging markets indexes of FTSE and S&P Dow Jones.

The UAE bourses were closed yesterday and will also be closed today for Eid Al Adha.

The National