A year ago, Nabil Rantisi spent his days trading stocks at a Dubai brokerage. Today he fills orders of a different kind. The gourmet deli he opened in September serves roast beef in a Yorkshire pudding wrap and other lunchtime fare to crowds that include his former clients. “Business was getting too slow, and at some point you have to decide where time would be spent in a more valuable way,” says Rantisi, who quit his job as brokerage director at Rasmala Investment Bank in June.
Three years after the collapse of a real estate bubble, Dubai’s financial industry is still in decline and shows little signs of recovery. Of the 98 brokerages active in 2008, 41 have suspended operations. The market value of shares in Dubai’s benchmark DFM General Index stood at $27.4 billion on Jan. 17, compared with $123.9 billion at the end of 2007.
Endowed with less than 10 percent of the United Arab Emirates’ oil reserves, Dubai has charted an economic course heavy on trade, tourism, and finance. The U.A.E.’s largest metropolis set its sights on becoming a regional finance hub. To attract global banks, asset managers and insurers seeking to capitalize on the region’s rising oil wealth, the city’s rulers set up a tax-free business park, the Dubai International Financial Centre, in 2004.
Goldman Sachs Group and Morgan Stanley were among those that opened offices there. By early 2008, Dubai’s main stock index had risen almost sixfold from its level five years earlier.
Then came the crash, caused largely by real estate speculation that left the government and state-owned companies saddled with about $110 billion in debt. Dubai, home to the world’s tallest skyscraper and palm-tree-shaped manmade islands, received a $20 billion bailout led by its wealthier neighbor, Abu Dhabi.
While the economy is on the mend—growth in the U.A.E. accelerated to 3.3 percent last year—foreign interest in Dubai has been dampened by Europe’s sovereign debt crisis. International investors bought shares worth $762 million in the third quarter, down 83 percent from the same period in 2009.
Banks including Credit Suisse Group and Nomura Holdings have trimmed their equities or equity research divisions in Dubai as trading volume has plunged. Al Futtain HC Securities, a leading Dubai-based broker, said on Jan. 4 it would end operations in the U.A.E.
Vyas Jayabhanu, the manager of Al Dhafra Financial Broker, has found a new line of business while he waits for the market to turn around. The 35-year-old broker is moonlighting as a hotel and nightclub developer. “In tourism, there’s something for everybody,” says Jayabhanu over coffee at Boutique 7 Hotel & Suites, a four-star Dubai hotel he helped get off the ground. “Encouraging clients to trade in this market is not ethical.”
“The smart brokers who manage to stick around will capitalize big time when volumes come back,” says Rantisi. The owner of the 1762 deli—named for the year the Earl of Sandwich supposedly asked for his meat to be served between two pieces of bread—is not holding his breath. He and his partners are gearing up to open a second branch of their establishment in another Dubai business district next month. Says Rantisi: “Business has exceeded expectations.”