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UAE Stocks Shed 57 Per Cent in 2008; Market Cap Put at Dh388b

DUBAI - UAE’s two stock markets recorded a compounded annual growth rate of 36.76 per cent in combined market capitalisation despite a plunge of 57 per cent in 2008, according to an equity research firm.

Morningstar, Inc., a leading provider of independent investment research base, said on Monday the combined market capitalisation of UAE markets had seen a rise from $8.67 billion at inception in 2000 to the current $105.93 billion (Dh388 billion, as of December 21, 2008), at a compounded annual growth rate of 36.76 per cent per annum.

While the Dubai Financial Market recorded the steepest fall of 73 per cent in 2008, far worse than its 44 per cent correction in 2006, the Abu Dhabi market shrank by 49.9 per cent, another study by TAIB Research shows. Worldwide, stock markets recorded losses of $29 trillion in 2008.

Shehab Gargash, CEO of Daman Securities, the brokerage arm of the Dubai-based asset management firm Daman Investments, said the rapid growth rate and deepening global interest in the UAE markets had created an equally fast paced, growing demand for transparency and knowledge-based investments.

Speaking at the launch of a new service for clients in partnership with the Chicago-based Morningstar, Gargash said the new service was well suited to meet that demand for specialised, objective investment planning tools. “It will provide qualified analysis on UAE investment offerings including stocks, mutual funds, and similar vehicles,” he said.

As the DFM bounced into the New Year with a 7.8 per cent gain on the first day of 2009 trading on Monday, Gargash warned that he was still more cautious than optimistic about the year ahead. “I don’t know if we have hit bottom,” he said.

Gargash said UAE stock markets to bounce back, a lot of confidence building measures should be initiated.

“It is a systemic issue reflecting a bigger crisis in the economy, liquidity and confidence. But stocks are the first thing to reflect problems and also the first to register solutions. We are waiting for stern and resolute action by the government, government entities and even investors. We are still at a junction and not sure which way it will go.”

He said the tie-up with Morningstar was to provide unbiased and impartial research not linked in any way to the broker’s own book.

“What sets Morningstar apart from other firms is its strong methodology and insightful, well-written analyst reports, which will provide an unbiased and objective international perspective on our equities markets. Morningstar’s research is consistently high-quality and concise, which our analysts and clients will certainly welcome when making suitable investment decisions,” he said.

Pat Dorsey, director of equity research for Morningstar, said independent analysis of a broad range of publicly traded companies around the world would help bring transparency to the markets. ”As we continue to expand our services internationally, we are looking forward to working with Daman to make our research available for the first time in the Middle East.”

The reports will be available starting January 18, 2009 with the publication of six initial reports, to be followed by additional reports released on a regular schedule.

He said two funds launched by Daman had been showing negative growth while its speculative fund was up four per cent. The Dh200 million Daman Speculator Fund that focuses on the UAE and GCC equity markets was launched in July.

· issacjohn@khaleejtimes.com