Abu Dhabi Securities Exchange
Abu Dhabi Security Exchange(ADX) is a stock exchange located in Abu Dhabi, United Arab Emirates. ADX was established on November 15, 2000, with the goal of trading the shares of local UAE companies. Under Local Law No. (3) 2000, ADX is an autonomous legal entity in both finance and management. To date, ADX has established branches in Fujeirah, Ras al Khaimah, Sharjah and Zayed City. The major sectorsof ADX are banks and financial services, construction, consumer, energy, healthcare, industrial, insurance, real estate and telecommunication. According to Abu Dhabi Security Exchange website, Adx.ae, as of the November 14, 2012, ADX had a total market capitalization of USD 80.7 billion from a total of 66 listed firms. The ADX index has been on an upward surge since early June to the current 2994.81 points, the highest attained in a year (ADX).
Dubai Financial Market
DFM was established on 26 March 2000 as an independent public institution. DFM is involved in listing and trading of public joint stock companies’ shares, bonds, Islamic Sukuk and mutual funds. As of November 14, 2012, there are 57 listed companies split into banks, Investment and financial services, insurance, real estate and construction, transportation, industrials, consumer staples, telecommunication, services, and Nasdaq Dubai. Nasdaq Dubai is the international arm that handles foreign trading. According to Dubai Financial Market website,on November 14, 2012, DFM had a market capitalization of USD 48 billion with a total of 57 listed firms. DFM has experienced improvement since the beginning of the year. In the 1Q12, it realized a AED 30.5 million profit. According to research firm, Global Research, this recovery has been attributed to better global indicators, good quarterly profitability by local companies, macroeconomic development in the Emirate of Dubai and improved investors’ confidence all over the world (8).
ADX has more listed companies than DFM but its trading volume is usually smaller (Omet, 8). Both ADX and DFM have experienced rapid growth since their establishment in terms of market capitalization and number of listings. The two markets form the second largest stock market in the Gulf region after Saudi Arabia’s Tawadul. Investment restrictions were reviewed in 2003 and foreigners were for the first time allowed to invest in these markets.
Despite impressive growth, the stock markets are relatively small compared to those of developed countries. Aside from the low number of listed firms, trading volume is usually low and infrequently traded. In addition, the stock market also has weak disclosure requirements. However, authorities have recently stepped up efforts to improve transparency and disclosure in the market. DFM index has been on an oscillatory climb since hitting a low of 1437.03 points in June. As of the November 13, the index stood at 1617.47 points against a base index value of 1000.
Performance
To assess the performance of companies at the DFM, EPS for each of the companies were obtained from DFM website.From the data, four-year averages were calculated and plotted.
Using data available from ADX website and Gulfbase.com, an analysis of performance of all the companies listed was carried out. Dividend Yield was used to assess the performance of all the companies over a 5-year period from 2007 to 2011. The top ranking companies in terms of this parameter are presented above. Impressive dividend yields are construed to provide decent future returns. Therefore, investments in shares with impressive dividend yields can be considered prudent. In this regard, ADIB, EIC, DHAFRA, NMDC, ETISALAT, JULPHAR, GCEM. UAE, UAB, BOS and RAKNIC can be worthy investments.
Earnings per share are important in comparing companies in the same sector. A steady EPS, consistent over a relatively long period portends good future profitability. Basing on the analysis of the same from DFM, share of Emirates, Alliance Insurance, Arab Orient Insurance, Arab Heavy Industry and United Kiapara Industries show high EPS values over a four-year period and can be considered good investments.
In conclusion, the above analysis may not be conclusive. It is better augmented with other performances ratios and perhaps a broader analysis that requires more time and resources will produce better results. I find DFM more active in volume, trade and individual company profitability. I would recommend investing in it.
Works Cited
Abu Dhabi Securities Exchange. (ADX). Yearly Trading Activities. 2011. Web.
Dubai Financial Market. (DFM).Companies Guide 2010. 2011. Web.
Global Research. Result Update Equity-UAE Financial Sector: Dubai Financial Market. 2012. Web.
GulfBase.com. GCC Stock Markets – Periodical Reports. 2012. Web.
Omet, Ghassan. “Stock Market Liquidity: Comparative Analysis of the Abu Dhabi Stock Exchange and Dubai Financial Market.”Politics and Economic Development: ERF 17TH Annual Conference Held 20-22 March 2011 at Renaissance Antalya Beach Resort& Spa,Antalya. Turkey. 2011. Web.