Mubasher TV
Contact Us Advertising   العربية

UAE brokerages’ profits plunge in 2016 on lower traded volumes

UAE brokerages’ profits plunge in 2016 on lower traded volumes
UAE brokerage firms’ profits plummeted 96.4% in 2016 due to a decline in trading volumes

By: Amr Adel

Dubai – Mubasher: UAE brokerage firms’ profits plummeted 96.4% in 2016 due to a decline in trading volumes.

A total of 48 firms logged net profits of AED 4.5 million down from AED 125.5 million in 2015, data released by the Securities and Commodities Authority (SCA) showed, noting that of the 48 firms, 30 recorded losses, while only 18 were profitable.

The brokerages reported a combined decline in revenues by 13.5% to reach AED 605.9 million in 2016 against AED 700.5 million in 2015, while the average for covering costs was 1.1 times in 2016 against 4.04 times in 2015.

The ratio of equity to capital of these firms nose-dived to 157% in 2016, versus 183% in 2015, and only 15 firms decreased their ownership rights to below their capital.

The decrease in traded volume is the main reason behind the decline in profits or the losses incurred by brokerages, Jamal Ajaj, director of Al Sharhan Shares Centre in Abu Dhabi, told Mubasher.

A drop in the firms’ asset values, whether in terms of market investments or within funds, is one of the main reasons brokerages suffered losses in 2016, the analyst noted.

On the Dubai Financial Market (DFM), traded volumes declined to 95.91 billion shares at a turnover of AED 122.11 billion in 2016, compared to 97.09 billion shares and liquidity of AED 157.9 billion in 2015.

The issue continued in the Abu Dhabi market where traded volume increased slightly to 29.258 billion shares and turnover fell to AED 48.81 billion in 2016 compared to 27.51 billion shares at AED 59.13 billion in 2015.

Weak trading activities tend to negatively affect companies’ financial results in the end, Ajaj noted.

As is the case with most financial markets, jitteriness, local and global news, whether positive or negative, make it impossible for companies to ensure the continuity of achieving profits or losses, Ajaj highlighted.

By the end of 2016, the UAE’s two bourses recorded gains, as the DFM surged 12.5%, while the Abu Dhabi Securities Exchange (ADX) rose 7.2%.

 

Translated by: Mai Ezz El Din