Dubai Financial Market (DFM)
The Dubai Financial Market is one of 3 stock exchanges in the UAE, and
one of 2 stock exchanges in Dubai. The others are the Abu Dhabi Securities Exchange (ADX), which was previously known as the Abu Dhabi Securities
Market (ADSM) (name changed in May 2008), and the Nasdaq Dubai, which was previously known as the Dubai International Financial Exchange (DIFX) (rebranded November 2008).
DFM history and companies listed
The DFM started operations in March 2000 as a government company and in November 2006 had its own initial public offering (IPO), which was hugely successful, although only 20% was sold, with the Dubai Government retaining the other 80%. There are over 60 companies listed (as of December 2008) on the Dubai
Financial Market (DFM) with a handful of new listings being added each year. Most listed companies are UAE based, although a few stocks from other
Gulf countries have secondary listings on the DFM (eg Arab Insurance Group from Bahrain, Agility Logistics
Foreign ownership of UAE stocks and shares
- Foreigners are allowed
to own up to 49% of publicly listed companies on the Dubai Financial Market,
however it is up to each company to determine what proportion they are
prepared to sell to foreigners.
- Some companies allow the maximum 49%,
some allow a smaller percentage, and some allow no foreign ownership or
only to citizens of other GCC countries.
Dubai stock market crash
- During 2004 and 2005, there were significant increases in the volume
of shares traded and the share prices of many companies.
- However, towards
the end of 2005 and throughout 2006, there was decrease of over 50% on
DFM and 30% on ADSM with similar bloodshed throughout the other GCC stockmarkets.
- During 2007 the UAE and Gulf markets started to recover hesitantly, with
a bit of a surge towards the end of the year, but they were a long way from
the boom times of 2004 and 2005.
- In 2008, DFM stock prices were steady initially with a few small rallies but by the summer, prices started to fade, and from about October as the global economic crisis spread, and it became clear that the Dubai property market had started to dry up, Dubai stock prices crashed with shares by the end of 2008 at unheard of low prices, and any remaining survivors of the 2005 crash got wiped out again.
UAE stock market regulatory authority
Of the 3 stock exchanges in the UAE, the DFM and ADSM list mostly UAE
companies, and the regulating authority is the Emirates Securities and
Commodities Authority (ESCA). The
DIFX (now Nasdaq Dubai) opened in the Dubai International Financial Center (DIFC) in 2005
for trading of international stocks, and they are regulated by the Dubai
Financial Services Authority (DFSA).
Dubai stocks and shares research and investment analysis
For research and analysis in English, information is sparse but improving
as the international investing community looks at Middle East stocks
in greater depth.
- EFG-Hermes (Egypt), The National Investor (TNI), and Shuaa Capital (UAE) are well known regional companies that produce
research reports on various stocks.
- Most brokers with online trading
have some form of newsfeed, and some produce their own reports.
organisations such as Credit Suisse, Deutsche Bank, Goldman-Sachs, HSBC, Morgan Stanley, and Nomura started
to produce reports on UAE companies during 2007 and 2008 (which mostly proved to be wildly optimisic after the market rout at the end of 2008).
- Reuters and Bloomberg cover the larger companies with news reports, and the local UAE newspapers all have business sections with some stock news.
DFM student trading floors at UAE universities and colleges
DFM has launched several educational trading floors at institutions in Dubai and Sharjah, so far, where students can learn about trading stocks and shares, how the stock market works, and participate in the DFM stock market game.
- American University in Dubai (AUD) - launching in early 2014?
- American University in the Emirates (AUE) - announced 13 Dec 2013
- Dubai Men's College - Higher Colleges of Technology - launched in 2012?
- Sharjah University - two trading floors?
DFM stock market game
The DFM stock market game is an annual competition for university and college level students, played online with pretend money and pretend stocks, but the actual stock prices are connected to real time data from DFM market data.
- Although the idea is that students learn about finances and stock investments, because of the short period of the competition (one month), winning depends mostly on luck and/or being very clever at short term technical analysis.
- Occasionally students find a way to manipulate stock prices and win that way. For example in one year, one or more students bought stocks in the game in some rarely traded companies, then bought enough real stocks in those companies to drive the price up, then selling the game stocks at an artificially inflated price, and winning the competition. Or would have done but the DFM figured out what was going on and reset the game counters to zero for a restart. It's not clear if those students learnt about market manipulation by playing the game, or knew about it already.