Dubai Financial Market braces for weak second-quarter earnings

Dubai Financial Market expected to report another weak quarter, after volumes in May showed a 30 per cent decline month on month.

The Dubai Financial Market Company is expected to report weak earnings this quarter unless volumes pick up this month, analysts say.

"I think the second quarter will be bad," said Mahdi Mattar, the head of research at CAPM Investment, an investment banking company based in Abu Dhabi. "Given that volumes haven't picked up, I am not expecting a change in core earnings," Mr Mattar said.

The stock exchange said the value of shares traded last month fell 29.6 per cent to Dh3.5 billion, compared with Dh4.9bn in April.

The number of shares traded also decreased, by 19.8 per cent to 3.2 billion last month compared with 3.9 billion shares traded in April. The Dubai Financial Market (DFM) Company reported Dh2.18 million in profits last quarter, down 95.9 per cent from the same period last year, after volumes continued to drop as popular unrest in the Middle East that ousted leaders in Egypt and Tunisia flared briefly in Oman, Bahrain and Saudi Arabia.

"What needs to be done is an update on the regulator's law, to bring down the minimum float required for listed companies from 55 per cent, to similar to Nasdaq Dubai," Mr Mattar said. Nasdaq Dubai requires companies to sell at least 25 per cent of their shares to investors. "Initial public offerings [IPOs], a main revenue source for the company, has been cut for the past three years," he added.

Insurance House in Abu Dhabi ended a drought of IPOs in the country after selling shares worth Dh66m in February. Since then, two other Abu Dhabi companies, Wataniya Insurance and Eshraq Properties, have been able to sell shares and list on the Abu Dhabi Securities Exchange.

Dampened investor sentiment has weighed on Dubai's main benchmark and has spurred more brokerages to shut this year. The DFM General Index is down 3.9 per cent to 1,566.71 points since January. There are now 65 brokerages operating in the country, down from 103 at the beginning of last year, according to trading reports published by the Dubai Financial Market.

DFM declined 0.8 per cent to Dh1.21 yesterday. The shares have lost about a fifth of their value since the beginning of the year.