An article (17NOV2008) from alaswaq.net (Arabic) points out that weaker trading volumes and the reduced number of trades threaten the survival of most UAE brokerage houses, which have already lost big chunks of capital because of wrong market bets on rising share values.
The article quotes Mr. Murtada Al Dandashi, CEO of Al Ramz Securities, as saying he expects 70 brokerage companies to exit the market after having lost 80% of their paid-up capital that they had used to speculate on the UAE stock markets and to secure bank credit lines to purchase even more shares. The recent plunge in the UAE stock markets since September has wiped out the value of brokers’ leveraged positions.
Dandashi expected the biggest 20 brokerage houses to survive intact. He expected another 20 brokers to go through a consolidation phase as they looked to strengthen balance sheets, solve liquidity problems, and to abide by the financial requirements set by ESCA.
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