SHARJAH, 29 August 2005 — The Emirates Securities and Commodities Authority (ESCA) and the management of the Dubai Financial Market (DFM) canceled all deals involving shares of the Dubai Islamic Bank (DIB) made yesterday.
The action, which also pinpointing two operators as allegedly involved fake deals involving DIB shares, came after charges were leveled that the rally of DIB shares was the result of price manipulation and it was artificially engineered.
An incredibly high volume of 268.23 million DIB shares were changed hands in 7,844 deals with a turnover of 9.34 billion dirhams. Frenzied deals on the counter took the overall DFM turnover to a height of 11.12 billion dirhams for the day.
On Saturday 143.7 million DIB shares were sold in record 6,292 deals fetching 4.66 billion dirhams.
The DFM management said that it has decided to cancel all the changes that resulted from these operations in terms of the closing price and balances of customers. “Necessary measures are underway against the violating parties and brokerage companies concerned,” the statement said.
“The DFM management studied the unusual trading movement on Dubai Islamic Bank’s shares on Aug. 28, 2005 and came to the conclusion that the majority trades on the shares of the said bank were made by two investors, who concluded corresponding and fake deals in huge quantities to affect the bank’s share price upward and downward in a bid to make fast profits,” said the statement.
“This, however, caused utmost harm to the other dealers in the market, who had no role to play in those trades.” Shortly after concluding yesterday’s trading session, the DFM management, in coordination with the ESCA, instituted an investigation into the price manipulation. The authorities studied the operations that were effected on the DIB counter. The bank showed prompt response to the DFM management’s letter requesting disclosure and replied to the circulating rumors.
The market was agog with rumors that the bank will go in for a capital increase through a rights issue after the recent stock split that boosted liquidity. Investors dismissed a denial by the DIB management last week that the bank had any plan for capital increase.
In a faxed letter addressed to DFM Director-General Essa Kazim, DIB Deputy Chief Executive Officer for Financial Affairs Mohammed Saeed Al-Sharif said the bank has not taken any decision to expand its capital.
