Only 30 stock brokerages will be left: Gargash

Low turnover and trading volumes will take toll on the stock brokerages in the UAE, reducing the number of brokers to 30 in the next few years, the chief executive of Dubai-based Daman Investments said.

A sharp fall in trading volumes is forcing equity brokerages in the region to close down as they struggle with low revenues and rising costs.

More closures are likely, as firms see the current market environment as being not viable enough to continue their operations, Shehab Gargash told reporters on the sidelines of a conference late on Monday.

"There were 120 (brokers) earlier, today there are around 70 and we expect the numbers to reach between 30 and 35 in the next two to three years," Gargash said.

Daman, which is active in asset management, brokerage and venture capital, in November announced plans for an initial public offering to strengthen its financial position.

The chief executive said IPO plans are still on track, adding that market conditions were expected to improve by end of 2012.

"We still believe that the market environment will be conducive for an IPO by the end of 2012, should it not be the case, we will be the first to come out and say that it will be a delay and not a cancellation," he said.

The company, which has over Dh5 billion ($1.4 billion) in assets under management, is in the process of completing a second round of a previously-announced Dh300 million private placement to a strategic investor.
It plans to secure an additional investment of Dh200 million in the process.

"We are still stepping up our size. The environment will flush out a lot of bounty hunters. There will be less competition but there will be serious competition," Gargash said.

he said stock markets in the UAE need additional liquidity from government funds to counter slumping volumes and muted investor activity.

"I think there should be a programme for creating sustained activity including pension funds and government funds," Shehab Gargash told reporters on the sidelines of a conference late on Monday.

"If you have the ability to prompt the market, use it because your market is a very easy and quick reflection of the health of the economy."

Turnover and trading volumes on Dubai Financial Market and Abu Dhabi Securities Exchange have slumped since the 2008 financial crisis, and debt worries have kept foreign institutional investors away from the markets.
UAE markets are the worst-performing among Gulf peers so far this year with lack of institutional participation hurting liquidity.

The DFM index is down 16.8 per cent this year and 76 per cent below a January 2008 peak. Abu Dhabi's bourse is down 8.5 per cent year-to-date.

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