Third-quarter earnings at Dubai Financial Market Company, the only bourse in the region to sell its shares to the public, are likely to be hurt by last month's global market rout.
The bourse's market capitalisation was slashed by Dh3 billion from the start of the quarter as the European sovereign debt crisis deepened and Standard & Poor's cut its credit rating for the US.
It has lost Dh2bn to Dh43.6bn since the beginning of last month. The company's shares have underperformed the overall market. DFM Company is down 7.4 per cent to Dh1.13 a share since July 1, while the Dubai Financial Market General Index is down 6 per cent in the same period. World stocks as measured by MSCI's All-Country World Index have fallen 12 per cent since the start of August as markets lost faith in the ability of politicians in Europe and the US to tackle mounting debt burdens.
The core revenue of the Dubai exchange comes from volumes traded on the bourse, which hit a record low on Sunday. Traded value on the Dubai exchange reached Dh84.3m yesterday, down from Dh102.2m, the 50-day average. So far, the exchange has generated Dh4.42bn in traded value for the quarter.
DFM charges a commission fee of 20 basis points per trade, at best, the company would have generated revenues from commission fees of about Dh9m for the quarter from traded value, bearing in mind there are still two more weeks to go to the end of the quarter. The exchange also receives revenue from Dubai's other exchange, the Nasdaq Dubai, since its incorporation, and other extra transaction charges.
"Trading commission fees are the principal revenue source and value driver for DFM, and are directly related to the overall level of turnover on the Dubai market," said Rahul Shah, an analyst at Deutsche Bank in Dubai.
Persistently weak trading volumes, compounded by the regional uprisings, sent profits at DFM Company down 96 per cent in the first quarter to Dh2.18m. The exchange posted a 96 per cent drop in Dh2.18m in the second quarter.
The UAE is home to the Dubai Financial Market, Abu Dhabi Securities Exchange and Nasdaq Dubai, all preparing to qualify for an upgrade to emerging markets status at the index provider MSCI.