(DENNIS B MALLARI)
The value of trade volume on the Dubai Financial Market fell 37 per cent to Dh125.3 billion in the first quarter of this year compared to Dh198.1bn in Q4 2007 on increasing capital flows to alternative investments including real estate, currencies and commodities.
The DFM’s trade value declined from Dh64.4bn in January 2008 to Dh39.4bn in February and declined further to Dh21.5bn in March.
The trade volume dropped from 13.5 billion shares in January to 8.2 billion shares in February and then 4.5 billion shares in March.
The decline in trade volumes and values was driven by all types of investors – local, foreign and institutional. Foreign and institutional investors continue to represent between 35 and 40 per cent of the total daily trade value in the market.
However, in October last year, the value of trades reached Dh60.9bn, while volumes reached 18.9 billion shares. Trade value and volumes in November surged to Dh85.5bn and 23.3 billion shares respectively. In December, the trade value dropped to Dh51.7bn and volumes touched 10.6 billion shares.
“The decline in trade values and volumes reflected the negative sentiment among investors due to the fluctuation in global equity markets and increasing fears of recession in the US economy.
Major investors always buy shares according to percentage of the daily trade volume of each stock to guarantee that they can sell these shares when they need to liquify their assets,” said Mohamad Al Beheiri, head of trading at Amana Financial Services.
“With the increasing number of investors reducing their investments in the stock market during the last three months, we notice continued decline in buy bids by different investors.”
“However, we noticed a marginal upward trend during the last two weeks, when the dollar stabilised and there was a slight decline in oil and gold prices. US and European markets realised some gains,” he added.
Strong corporate earnings including record profits from Amlak in recent days are expected to bring volumes back to DFM.
A major factor causing thinner trading volumes, analysts said, is the increasing trend among investors to shift capital to traditional safe havens such as property and gold – taking advantage of the metal’s recent dip below $900.
Share volumes on DFM slump in first quarter