Dubai Financial Market PJSC rose to the highest level in two weeks after the United Arab Emirates regulator endorsed trading rules, fueling bets volumes will increase, boosting revenue.
The shares advanced 2 percent to 1.03 dirhams, the highest since Sept. 19, at the close in the emirate, bringing the gain this week to 6.2 percent. The stock was the third-biggest gainer on the benchmark DFM General Index, which rose 0.3 percent. The regulator endorsed securities lending and borrowing, as well as short-selling regulations, according to a statement on its website.
The bourse’s revenue relies in part on trading volumes, which have fallen as foreign investors trimmed holdings of riskier assets amid Europe’s debt crisis. About 268 million shares traded in Dubai today, down from this year’s peak of 835 million in March. The DFM may post a 30 percent drop in trading-based fee income in the third quarter from the previous three months, HSBC Holdings Plc said in a note last month.
“The stock advanced after the most important pillars of trading techniques and liquidity providing” were approved, a move that may help boost trading volumes, said Talal Touqan, head of research at Al Ramz Securities LLC in Abu Dhabi. The new rules “if effectively applied, may even help us secure an upgrade to the MSCI emerging market status,” he said.
The U.A.E. in June failed to secure an upgrade to emerging market status from frontier at MSCI, which cited market accessibility issues. An upgrade may lead to the nation’s equities luring more of the investor assets that track MSCI’s gauges. The DFM is one of three bourses operating in the second-largest Arab economy alongside Nasdaq Dubai and the Abu Dhabi Securities Exchange. MSCI, a New York-based index provider, tracks economic development, trading volumes and market accessibility to assess market classifications.
“The regulation will help maintain market balance and boost national economy,” the regulator cited Economy Minister Sultan Al-Mansouri as saying.
The DFM’s second-quarter profit fell 31 percent to 10.2 million dirhams ($2.8 million) as revenue declined. Two analysts recommend investors hold the shares while four say sell, according to data compiled by Bloomberg.
A short sale is the selling of a security that the seller doesn’t own but is committed to repurchase eventually. Investors use short sales to capitalize on an expected decline in the security’s price.