Government urged to intervene in equties

The UAE stock markets need immediate government intervention to create governmental or semi-governmental funds for investment in equities, according to a senior market expert.

Mohammed Ali Yasin, Chief Executive of Shuaa Securities, called for immediate government action to stop the bleeding in the UAE's stock markets.

"Due to the current global financial crisis, there is no market around the world able to improve its performance by itself. We saw governments taking the lead to control deteriorating situations in equity markets around the world and we need the same thing from the UAE Government."

Yasin said the establishment of government-related investment funds would play a major role in returning trust and credibility to the stock markets.

"Such funds will have enough liquidity, accurate analyses and data about the various listed companies, so they can lead the markets. They can play a major role in bringing back fair prices for leading stocks in both the ADX and the DFM. The current price levels reflect investors' fears rather than the actual performance of the companies," he told Emirates Business.

The call for government investment funds in the UAE stock markets came after news yesterday that the Kuwaiti Government would launch a fund to buy Kuwaiti equities. Investor confidence in the Kuwaiti market went up strongly on the back of the news and the market gained 2.8 per cent yesterday.

Yasin said if a similar fund was started by the UAE Government, it would not play the role of market maker at this stage. "The market maker works in a balanced market. However, such as funds will be a net buyer of stocks until they return to the fair levels in terms of prices."

He warned that the continuous decline in the stock markets would have a negative impact on all parties, including the markets, investors and listed companies, in both the short- and long-term perspective.

"Government intervention has became critical at this stage because continuous drops in the prices of leading stocks will have a negative impact on the profitability of the companies, their financial position and their credit ratings in the future.

"Recently, individual investors have started a new wave of liquefaction and are leaving the markets because they have suffered severe loses in the last few months. This will have a negative impact on the stock markets for the long-term, as those investors will not return to trading for a long time in the future," Yasin said.

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