Day traders offered a slim ray of light in Dubai last month as institutional investors drew back amid fears of regional instability.
Small investors pumped nearly US$1 million more into the Nasdaq Dubai last month compared with April, according to the exchange. That volume grew even as the total value of equities changing hands between any investors slumped by 12 per cent.
Jeff Singer, the chief executive of Nasdaq Dubai, welcomed the steady volume from day traders in "a difficult period for the regional capital markets".
The Nasdaq Dubai, where $63m in equities changed hands last month, depends largely on the ports company DP World, which also listed in London this month, for its trading volume. The exchange has suffered along with the UAE's two other bourses, the Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX), amid lacklustre investor sentiment.
The FTSE Nasdaq Dubai UAE 20 index, which tracks 20 stocks from the three exchanges, has fallen 4 per cent since the start of this year.
"In the last couple months the institutional investors have been a bit more quiet, and part of that is because of the volatility that has been occurring in the region," said David Verghese, a fund manager at Emirates NBD. "A lot of the institutional investors are taking a more passive investment stance."
Markets are now waiting on a decision from the index compiler MSCI on whether it will upgrade the UAE from frontier to emerging market status.
"If that comes through, then we could see a significant ramp-up in terms of volumes," Mr Verghese said.
Next month Nasdaq Dubai is scheduled to begin using the delivery versus payment settlement system, which reduces the risk of transactions and factors in the MSCI's criteria for upgrading markets. The DFM and ADX have already introduced the system but have had difficulties getting brokers and custodians to use it successfully.
This month is expected to be slow on all three bourses as companies stay quiet before reporting quarterly earnings.