The Dubai Stock Exchange cancelled about AED9.4 billion (US$2.56 billion) in trades in the Dubai Islamic Bank on Sunday after finding evidence that record volumes on the bourse were fuelled by market manipulation.
More than 268 million DIB shares changed hands in 7,844 deals on Sunday, topping Saturday's record 43.7 million DIB shares sold in 6,292 deals, as investors flocked to the bank's stock in the hope that DIB was preparing to raise capital. The frenzied trading sent volumes on the exchange soaring to a record AED11.1 billion. This compares to an aggregate turnover of AED51.1 billion for the whole of 2004 and AED4 billion during 2003.
In the previous week, DIB's share price had risen by almost 25%, and the bank's stock is up 250% for the year. However, Emirates Securities and Commodities Authority (ESCA) and the management of the Dubai Financial Market (DFM) canceled all deals involving DIB shares that were executed on Sunday after allegations of fake deals and price manipulation.
"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 of 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," a DFM statement explained.
Rumours swept the market that DIB was looking to increase capital through a rights issue after a recent stock split, despite a assurance by the bank that it has no plans to issue more shares "for the time being." DIB later confirmed this in a faxed letter addressed to DFM Director-General Essa Kazim.
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