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Thirsty markets

Thirsty markets

Lack of liquidity continues to plague the local financial markets. Regional unrest and a world economy on the brink again won’t help. Will a new SME IPO market?

March 15, 2011 2:14 by

The Dubai Financial Market Company is the entity behind the Dubai Financial Market (surprise, surprise), and it had a bad year in 2010. According to Gulf News, the company saw profits slump last year by a considerable 75 percent.

Yes, it’s is still a profit, and profits are pretty much always a good thing. But the company reported a net profit of AED 78.9 million for the year, compared to AED 347 million in 2009 – and that’s a heck of a drop.

Are the guys at DFM phased? Apparently not. Abdul Jalil Yousuf Darwish, Chairman of Dubai Financial Market, said. “2010 is considered the year of enabling DFM’s strategy. This strategy is fully synchronised with Dubai’s ultimate goal to become the dynamic financial markets hub in the region. Consequently, DFM proceeded with the realisation of its strategic plans aimed at achieving the highest levels of integration with NASDAQ Dubai by consolidating the strengths and competitive characteristics of both sides.” In other words, don’t panic, this was totally expected.

The reason for this fall off in profits is obvious, but since the National felt its super smart readers needed it explaining we’ll do the same: The financial crisis has blown a hole in market liquidities. In other words, there is a lot less money about, and as a result trading volumes are way down. Everyone knows this, even Kipp has touched on it, and it’s why many people are calling for the UAE markets to merge, to combine what liquidity there is and attract some more international investment.

Well that’s still on the table; in the meantime, the year started brightly, with big hopes of a recovery in liquidity in the markets as investors started to loosen their purse strings. What no one reckoned with was the Arab uprisings, which have injected some major fear into investor circles. At time of writing the DFM, for instance, was down more than 11 percent on last year, which as we have pointed out, was not a good year.

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