Dubai’s stock index climbed to the highest in almost five years, led by Dubai Financial Market after Reuters reported that the emirate and Abu Dhabi hired banks for a possible merger of their bourses.
The DFM General Index gained 2.7 percent to 2,829.53, the strongest close since November 2008. The measure has climbed 22 percent from a two-month low in September, entering a bull market. The shares of DFM, the only publicly traded exchange in the region, surged 15 percent, the most in four months. Dubai Investments PJSC, which holds stakes in more than 40 businesses, also soared 15 percent, the most since 2009.
Abu Dhabi and Dubai aim to reach an agreement on the merger of the exchanges by the end of the year, Reuters reported, citing people it didn’t identify. The DFM isn’t party to any merger talks, the company said in a statement posted on the bourse website. In April 2012, Abdullah Al Turaifi, chief executive officer of the Securities & Commodities Authority, said the owners of the bourses may “hopefully” decide by the end of that year on whether to consolidate their operations.
“The market turned positive mainly thanks to the DFM stock,” Yaser Abushaban, executive director of asset management at Emirates Investment Bank PJSC, said by phone. “Investors expect a merger between the two exchanges to mean improved valuations, better liquidity and more flows” which would lead to higher commissions for the bourse, he said.
The average daily trading value on Dubai’s bourse is 574 million dirhams ($156 million) this year, compared with a record 1.5 billion dirhams in 2007, before Dubai’s housing market crashed. Dubai and Abu Dhabi’s stock indexes have been the best performing this year among the 50 largest tracked by Bloomberg, as growth accelerates in the United Arab Emirates, the second-biggest Arab economy. Dubai’s gauge has surged 74 percent while Abu Dhabi’s jumped 47 percent.
DFM shares jumped to 2.34 dirhams, the highest since November 2009, while DIC closed at 2.18 dirhams as trading volumes of both companies climbed to almost five times the three-month daily average.
The U.A.E. is home to three exchanges. The Abu Dhabi Securities Market and the DFM are regulated by the Emirates Securities & Commodities Authority, while Nasdaq Dubai is regulated by the Dubai Financial Services Authority.