Arab stock markets lack liquidity — head of Oman’s stock exchange

The Arab stock exchanges suffer from a lack of liquidity as shareholders tend to keep hold of their stocks rather than trading them, Ahmed Saleh Al-Marhoon, the director-general of the Muscat Securities Market, said. (AFP)
Updated 30 October 2018
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Arab stock markets lack liquidity — head of Oman’s stock exchange

  • ‘Furthermore, we have not witnessed in the recent years big IPOs. We need big IPOs’

DUBAI: There should be a more vibrant trading activity among equity markets in the Gulf region to improve their liquidity levels, the director-general of the Muscat Securities Market said in a report by Zawya.
The Arab stock exchanges suffer from a lack of liquidity as shareholders tend to keep hold of their stocks rather than trading them, which leads to lower trading volumes, Ahmed Saleh Al-Marhoon said on the sidelines of the Abu Dhabi-hosted annual conference of the Federation of Euro-Asian Stock Exchanges, particularly noting Muscat’s own experience ‘as well as other markets in the Gulf Cooperation Council and the wider Arab region.
“Furthermore, we have not witnessed in the recent years big IPOs. We need big IPOs,” he said.
Saudi Arabia, the Arab world’s biggest economy, has postponed plans for a flotation for up to 5 percent of state-owned oil firm Saudi Aramco – a deal which could possibly create the most valuable listed company in the world.
Saudi Crown Prince Mohammed bin Salman, in an earlier report, said the flotation of Saudi Aramco would proceed by 2021.
“I believe late 2020, early 2021,” he told Bloomberg in an interview, referring to the timing of the IPO. “The investor will decide the price on the day. I believe it will be above $2 trillion. Because it will be huge.”
The Muscat bourse head also noted that there have also not been any IPOs on primary markets in the UAE – the region’s second-biggest economy – this year.
“Those big IPOs will make these funds and (wealthy) individuals sell portions of what they have in order to buy from the new company, which will make the market more liquid,” Marhoon said. “This problem almost prevails in all Arab countries.”


Dubai real estate market recovery to be seen as of 2022: S&P

Updated 20 February 2019
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Dubai real estate market recovery to be seen as of 2022: S&P

  • The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate
  • S&P was generally comfortable with the credit ratings of the emirate’s banking system

DUBAI: S&P Global, the ratings agency, painted a grim picture for the real estate sector in Dubai, with a meaningful recovery in property prices expected only after 2022.
At a presentation to journalists in the Dubai International Financial Center, S&P analyst Sapna Jagtiani said that under the firm’s “base case scenario,” the Dubai real estate market would fall by between 5 and 10 percent this year, roughly the same as the fall in 2018, which would bring property prices to the levels seen at the bottom of the last cycle in 2010, in the aftermath of the global financial crisis.
“On the real estate side we continue to have a very grim view of the market. While we expect prices to broadly stabilize in 2020, we don’t see a meaningful recovery in 2021. Relative to the previous recovery cycle, we believe it will take longer time for prices to display a meaningful recovery,” she said.
S&P’s verdict adds to several recent pessimistic assessments of the Dubai real estate market. Jagtiani said that conditions in the other big UAE property market, in Abu Dhabi, were not as negative, because “Abu Dhabi never did ramp up as much in 2014 and 2015 as Dubai.” S&P does not rate developers in the capital.
She added that a “stress scenario” could arise if government and royal family related developers — such as Emaar Properties, Meraas, Dubai Properties and Nakheel — which have attractive land banks and economies of scale, continue to launch new developments.
“In such a scenario, we think residential real estate prices could decline by 10-15 percent in 2019 and a further 5-10 percent in 2020. In this case, we expect no upside for Dubai residential real estate prices in 2021, as we expect it will take a while for the market to absorb oversupply,” she said.
S&P recently downgraded Damac, one of the biggest Dubai-based developers, to BB- rating, on weak market prospects.
However, Jagtiani said that, despite the “significant oversupply” from existing projects, several factors should held stabilize the market: Few, if any, major product launches; improved affordability and “bargain hunting” by bulk buyers; and a resurgence of Asian, especially Chinese, investor interest in the market.
Jagtiani also said that government measures such as new ownership and visa regulations and reduction in government fees could help prevent prices falling more sharply, as well as “increased economic activity related to Dubai Expo 2020, which is expected to attract about 25 million visitors to the emirate.”
The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate. “In our view, credit conditions deteriorated in Dubai in 2018, reducing the government’s ability to provide extraordinary financial support to its government related entities (GREs) if needed,” S&P said in a report. “The negative outlook on Dubai Electricity and Water
Authority (DEWA) partly reflects our concern that a real estate downturn beyond our base case could out increased pressure on government finances,” the report said.
It pointed out that about 70 percent of government revenues come from non-tax sources, including land transfer and mortgage registration fees, as well as charges for housing and municipality liabilities, as well as dividends from real estate developers it controls, like Emaar and Nakheel.
S&P was generally comfortable with the credit ratings of the emirate’s banking system, which has an estimated 20 percent exposure to real estate. “Banks in the UAE tend to generally display a good level of profitability and capitalization, giving them a good margin to absorb a moderate increase in risks,” the report said.