DFM bourse profits rise by nearly 600%

Investors flocked to trade shares of Dubai-listed companies this year, driving up profits sevenfold at the Dubai Financial Market Company in the second quarter.

The bourse benefited from increased share-trading activity in the lead-up to the UAE's upgrade to emerging markets status by the index compiler MSCI reporting net income in the period ended June 30 of Dh69.5 million - up more than 580 per cent from the year earlier's figure of Dh10.2m.

A consensus of analysts polled by Bloomberg expected the company to report earnings of Dh64m. MSCI, whose indexes are tracked by investors with about US$7 trillion in assets, upgraded the UAE to "emerging market" from its previous "frontier" classification on June 12. The company registered 14,359 new investors in the first half of the year, compared with 5,097 a year earlier.

DFM's "development efforts have been well recognised by local and international investors with reignited interest towards the market since the beginning of this year," said the chief executive Essa Kazim. The MSCI upgrade had also offered a confirmation to sophisticated investors that key market infrastructure has been implemented, he added. Revenues in the second quarter more than doubled to Dh112.7m from Dh49.6m in the same period last year. Expenses reached Dh43.2m, a slight increase from last year's Dh39.4m.

The markets have been boosted by a trading bonanza over the past year, amid renewed investor interest, helped by a strong economic recovery and an uptick in merger and acquisition activity in blue-chip companies.

The Dubai Financial Market General Index has risen 63.2 per cent so far this year, trading at 2,541.52 points. It has outperformed the Abu Dhabi Securities Exchange General Index, which has risen 54.5 per cent over the same period, trading at 3,857.52. "There was a big shift in momentum," said Tariq Qaqish, the head of asset management at Al Mal Capital in Dubai. "It was a combination between improved investor confidence, better liquidity, stronger economic growth and a stream of positive news."

Trading activity, of which commission income remains the bread and butter of the exchange, has staged a remarkable recovery.

The stock market traded Dh38 billion worth of shares in the second quarter, compared with Dh11.8bn a year earlier.

Investors are awaiting further information on a potential merger of the Dubai Financial Market and Abu Dhabi Securities Exchange, Mr Qaqish said. The development was first mooted three years ago.

Sultan Al Mansouri, the Minister of Economy, in March last year reassured the market that the plans were still being considered.

"The deal is not off the table. [The merger] is still being discussed," he said in an interview with The National at the time.

"Consolidation makes perfect sense given the size and liquidity of the two exchanges. This has become more apparent in light of the recent upgrade by MSCI," said Rami Sidani, the head of Schroder's Middle East and North Africa desk.

"Unfortunately it's very hard to speculate because the decision has been due to the lack of transparency and the process has been on the table for a very long time."

Shares of the Dubai Financial Market Company, the bourse's floated stock, have risen by more than 100 per cent this year.

"The stock price is not being driven by price to earnings, but by further speculation over the merger," Mr Qaqish said. They closed 4.5 per cent higher at Dh2.07 each in trading yesterday, before the release of the exchange's financial results.

halsayegh@thenational.ae