Look who’s back

Look who’s back

Although the DFM performed poorly last week, some foreign investors have returned to the market. Is our luck starting to change?

November 16, 2008 10:14 by kippreport

For almost five months, foreign investors steered clear of the Dubai Financial market (DFM). But last week, they bought AED49 million more shares than they sold. So is this the beginning of a trend?

One week of trading isn’t enough to determine if it’s a trend or a one-off, but Mohammed Ali Yasin, the managing director of broker Shuaa Securities thinks it’s a “positive sign,” although he isn’t sure “whether they’re here for the short term or the long term,” he said to The National.

In spite of foreign trading, however, the DFM fell approximately 25 percent last week, closing at 2,106.14. Nevertheless, trading by foreign investors (as minimal as it was), may mark the beginning of a renewed trust in regional markets.

Falling share prices of Gulf based companies have shown that foreign investors influence local markets significantly. For instance: Sorouh, the Abu Dhabi based property developer, announced it will reduce the percentage of shares foreigners can buy from 20 percent to 15 percent. The move was to protect the developer’s shares from the uncertain “inflows and outflows” of foreign investments. Although Sorouh’s decision has further discouraged foreign investors to inject cash into local markets, it exposes how susceptible Gulf-based companies to ebbs and flows of foreign investment.

A rise in foreign investment may mean the markets may rebound soon. But then again, it was only a week’s performance.

We’ll keep you posted. –DB