DFM suffers lowest volumes since 2004

What's Down: Dubai Financial Market Company begins the fourth quarter with a weak start, with traded value reaching the lowest since 2004.

The fourth quarter began with a bump for the Dubai Financial Market (DFM) Company, the only bourse in the region to sell its shares to the public, after trading volumes reached their lowest since 2004.

Markets DFM

The bourse's performance

The core revenue of the Dubai exchange comes from volumes traded on the bourse.

Traded value on the Dubai exchange reached Dh30.2 million yesterday, down from Dh88.6m, the 50-day average.

"We've never seen volumes like this," said Nabil Farhat, a partner at Al Fajer Securities in Abu Dhabi. "It's as if there is no interest in the market any more."

The bourse is expected to post sluggish third-quarter earnings in the coming few weeks after it generated only Dh5.25 billion in traded value as the August global market rout dampened investor demand for trading shares of local companies. DFM's market capitalisation was cut by Dh4bn to Dh42bn from the start of the quarter as the European sovereign debt crisis deepened and the US top-tier credit status was downgraded.

Shares of the stock exchange have underperformed the overall market. DFM Company is down 28 per cent to Dh1.08 a share since July 1, while the Dubai Financial Market General Index is down 12 per cent to 1,630.52 points in the same period.

World stocks as measured by MSCI's All-Country World Index have fallen 16.7 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.

DFM charges a commission fee of 20 basis points per trade and performing at its peak the company would have generated revenues from commission fees of about Dh10.5m for the quarter from traded value.

The exchange also receives revenue from Dubai's other exchange, the Nasdaq Dubai, and other extra transaction charges. The bourse posted a 96 per cent drop in profits for the first quarter to Dh2.1m and a 46 per cent drop to Dh14.7m in the second quarter.