- Abu Dhabi, Dubai – Rami Samih, Amr Adel
March 10, 2020 In a message of reassurance to investors and markets, the Securities and Commodities Authority held a meeting with the Abu Dhabi Stock Exchange and the Dubai Financial Market to closely examine and study the conditions of the markets and contain the repercussions of the recent declines, while experts and analysts emphasized that the local stock declines come on the impact of losses witnessed by Arab and international financial markets, Because of concerns about the negative repercussions of the spread of the Coruna virus on the global economy, along with the failure of the ‘OPEC Plus’ agreement.
Experts and analysts added to the ‘economic statement, that the decline of local shares is exaggerated and unjustified due to its dependence on external and not internal factors, expecting the shares to bounce with the fears of investors gradually fading and calm the global situation, noting that the local markets provide promising opportunities for investment while trading the prices of the majority of shares At attractive and attractive price levels after hitting its lowest levels in years.
The attendees at the Authority’s meeting chaired by Dr. Obaid Saif Al Zaabi, CEO of the Authority, and the presence of Ghanem Al Dhaheri, Executive Vice President of Abu Dhabi Market and Khalifa Rabaa, Vice President of Operations from the Dubai Market, stressed the strength of the state’s economy, its solidity and immunity from the reality of positive macroeconomic indicators, and pointed to the success of joint-stock companies The local general public included in achieving good profits from last year, and the growth rate of net profits increased to 9% compared to net profits in the previous year.
The attendees noted the mechanisms developed by the authority, in cooperation with the markets, to contain the negative results of some companies, whether related to the merger of the losing company with another company or companies, the acquisition of existing companies as well as the entry of strategic partners, the conversion of cash debt into shares in the capital of the company, and the issuance of convertible bonds To shares, with the exception of the priority right of the company’s shareholders, and the mechanism established by the Authority at the end of last year regarding the procedures for companies listed on the market whose accumulated losses amount to 20% or more of its capital.
The attendees discussed several other measures that would contribute to supporting the factors of balance between buying and selling, and they explained that the uncovered short selling mechanism that helps in the drop in global markets and is prevented by regulatory bodies in times of crisis is not activated in the state markets. Also, the financial markets are currently studying the possibility and feasibility of reducing maintenance margin on margin trading in accordance with international practices in this regard.
The Authority is currently activating the powers granted to it to facilitate the companies’ repurchases of its shares in accordance with the international practices in effect at the time of declining markets, and the Authority is also in contact with the Central Bank to consider mechanisms for the banks to liquidate the shares used as collateral when prices fall, and the Authority is working closely with the listed markets and companies For full activation, to ensure the continuity of association with various electronic means such as electronic voting, invitations to be sent via email and text messages.
For his part, Mohamed Ali Yassin, CEO of Strategies and Clients at Al Dhabi Capital, said that the declines in local markets are unjustified and not based on an internal reality, but investors’ fears of developments in the world due to the Corona virus, along with oil markets after the failure of the ‘OPEC’ agreement Plus.
He explained: The declines in the local markets are driven by sales by foreign and institutional investments, as they usually make their decisions in these situations based on global data, and therefore the local investor must be aware that the market is far from the panic in the global markets. Focusing on companies with good and strong financial position and high dividend distributions.
He pointed out that the Emirati companies listed before the current decline were the best in terms of repeating profitability in the region, and now the repeaters have decreased to levels 5 times, and that many companies increased their distributions to levels between 7 and 8% annually, in addition to the annual profit growth of the listed companies, in addition to The solid foundations of the country’s economy, its solidity and immunity in facing global challenges and crises, all of which are positive factors.
Yassin called on the investors to avoid emotional decisions from making an investment decision, not to make random sales without a good study, and focus on stocks that have good financial solvency, strong profits and generous distributions, indicating that the declines in the markets are temporary, and the stocks will return to decline and recover With the calm of global conditions.
Rushdi Samakieh, Executive Vice President of Genero Capital, said that the JSC meeting with the Abu Dhabi and Dubai markets to discuss the financial market conditions comes within the framework of its responsibility as a watchdog, supervisor and regulator of the country’s financial markets, which represents a message of reassurance to investors and shareholders who are yesterday The need for it, and it reinforces confidence in the commission that all things are under control.
He added that the declines in the financial markets in the UAE are not primarily related to internal reasons, as they do not reflect the strength and strength of the national economy, but rather were the result of investor fears of developments in the world due to the Corona virus, along with a sharp drop in oil prices.
Bounce and recover
Financial analyst and financial markets expert Tariq Qaqish said that the decline in local markets in the last sessions was “unjustified and was driven by global external factors, not internal, such as the developments of Corona and the failure of the agreement” OPEC Plus.
He added: ‘The decline is usually justified when it reaches certain limits, but what is happening now and the rates that the markets and stocks have reached are unjustified and indicate the investors ’fears.
Qaqish believes that what the markets are witnessing at the moment is a temporary matter that will disappear and fade, and there will be rebound, recovery and return of confidence in the near future with the calm of global conditions, especially as there are strong foundations for local markets and a strong economy capable of facing crises and difficult challenges.
He called on the investors to take care of their investments and not to sell randomly, especially since the recent declines are exaggerated, but it left good opportunities and attractive and attractive prices that must be seized, with expectations of rebounds and corrections up with the calm of the global situation.
Qaqish provided several advice to investors, namely, not to resort to borrowing and margin in times of falling markets, especially investors who do not have sufficient knowledge to deal with this mechanism in times of crises and declines, and he called for the necessity of reducing margin in portfolios, prudence, and delaying when deciding to buy or sell, and retaining With sufficient liquidity to seize opportunities when the opportunity arises.
Rami Elias Sammou, General Manager of Denovo Financial Advisors, said that the global and local stock market declines were emotionally charged due to concerns about the real economic impact of the Corona virus.
Rami added that fear, anxiety and caution still dominate all financial markets around the world, which provides investors with good opportunities to buy and create tremendous wealth while trading prices at attractive price levels. Rami called on investors to control their reactions to the markets, and to make their investment decisions based on logic and thinking away from emotions and haste.
The body rest assured
The uncovered short sale mechanism is not activated in the state markets
Feasibility study of reducing maintenance margin on margin trading
State markets have low correlation with markets experiencing undue decline
Activating the authority of the commission to facilitate companies’ buy-backs of their shares
Activating the mechanisms for banks to liquidate shares of collateral when prices drop
Ensuring the continuity of holding associations through electronic means