Lack Of Liquidity Stifling UAE Market

by Carla Johnson, Investors Offshore.com

29 July 2002

Lack of liquidity is suffocating the UAE stock market, according to analysts in the region.

Reporting last week, Gulf News Online revealed that despite a recent surge in dealing following the opening of two official trading floors, the high proportion of stock owned by the government and long-term shareholders has meant that there is little activity on the regional bourses.

This, according to the news service, is made even more obvious by the high turnover of shares in neighbouring Gulf states:

'In June, turnover in Kuwait stood at around Dh 10.5 billion while it was estimated at nearly DH2.13 billion in the UAE during 2001. In June, turnover did not exceed Dh300 million on the Abu Dhabi and Dubai bourses,' the news service lamented.

Elaborating on the reasons behind the low turnover, Ziad Dabbas, the Director of Share Dealing at the National Bank of Abu Dhabi explained that:

'The main reason for this low turnover in the UAE is that a large part of the listed firms is owned by the government and a limited number of shareholders who keep their shares for a long period of time...this means that their share is almost frozen.'

He estimated that combined government and long-term shareholder ownership could account for as much as 86% of stocks available on the exchange.

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