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GCC FINANCIAL MARKET
Transcript of GCC FINANCIAL MARKET
Insurance Markets UAE maintained low level of market valuation in 2007 despite the strong performance.
With the market trading at low valuation along with growth, it has attracted foreign investors.
Foreign Exchange Market Which was supported by economic growth, high liquidity and soaring oil prices
Index decreased to 2552.3 (57.58% decrease) The UAE capital market saw impressive performance compared to the SC GCC Index
Conclusion Commodities market The commodity market in the UAE increased its brokerage firms by 9 in 2008, to become 130 Or click on another Path element to continue from there Market capitalization grew 55.4% in 2007 in comparison with 2006
.............02.............................04...................................06.................................08.................................10 The SC UAE index expanded by 43 percent to 5931.95 points
UAE & Oman Financial Markets UAE and Oman are among the countries that form the GCC Their financial markets belong to the region between emerging and developed markets..
Record year for IPOs (AED 24bn worth) of IPO listings. 205% increase from 2006 That's All Folks! Value of local company decreased by 55.87%
UAE This growth was resulted from new IPOs and index appreciation
Index grew by 43% in 2007
In 2008, and with the global crises, the trend reversed dramatically.
Market capitalization decreased 48%
Only 10 IPOs was executed with a value of AED 4.68 bn (only 20% of IPO value of last year)
BOND MARKET Conventional bonds Shari’ah compliant bonds ( AKA Sukuk)
UAE is the largest bond issuer in the GCC in 2009 US $36.6bn
71 bond issuances
TOTAL fixed income issuances Majority of bond issuances was of sovereign corporations, which was largely or fully owned by the states, accounting for 93.8% of the issuances Future contracts traded : 1,142,493 (25.9% increase from 2007)
DERIVATIVES MARKET Currently, there are 21 future contracts offered on NASDAQ Dubai index.
The NASDAQ Dubai index has listed both standardized future contracts and non-standardized pre-negotiated options contracts.
The derivative markets is correlated with the stock market which provides hedging for investment.
However, it is still limited due to lack of incomplete market structure.
The listed companies in the stock market is limited, thus preventing the development of the debt and derivative markets.
INSURANCE MARKET Plays one of the fundamental roles in the development of the economy
Considered one of the most imperative instrument used to cover the society’s risk.
Comprised of life and non-life insurance
Life insurance activities is not widely practiced because of religion, cultural and the high cost.
Foreign exchange market
3 MAJOR PLAYERS Central bank
Since the government receives dollars from selling oil, it is the major supplier of that currency particularly.
The central bank has been increasing its demand for foreign currency over the past a couple of years
As shown on the table. The central bank bought AED 173,717 millions worth of foreign currency.
Largest bond issuer in the GCC in 2009:
71 bond issuances
Trade value : US$57.43 billion (65.60% increase from 2007)
Financial rules and regulations
2 financial jurisdictions
DIFC (Dubai International Financial Centre)
DFSA (Dubai Financial Services Authority)
DIFX (Dubai International Financial Exchange)
DME (Dubai Mercantile Exchange)
Along with its own rules and regulations Larger part of UAE
MEP (Ministry of Economy and Planning)
ESCA (Emirates Securities and Commodities Authority)
Has the mandate to formulate regulations
Monitor the conduct of players
Address complaints that are incidental to the proper functioning of the commodities and securities market
Other regulations that relates to insider trading and price manipulation Law prohibits stock brokers in engaging in stock trading
Law prohibits market players in for submitting false data or statements that could impact the maket value of certain stock or an investor’s decision to buy or sell. MEP (Ministry of Economy and planning )
Is charged with the mandate of supervising the insurance industry through the insurance authority.
Supervision includes mainly on compliance to set standards as opposed to the companies risk exposure.
It also ensures that all the insurance brokers are required to have a bank guarantee of 1 million Dirhams.
UAE is part of the GCC countries whose markets have not undergone the complete matamorphosis.
Their economic strength does not make them an emerging market because their microstructure is not fully developed.
For example, derivatives trading is still a new phenomenon, thus, it does not have comprehensive framework to oversea the derivative markets. To ensure market growth, UAE need to have a customized and comprehensive framework.
OMAN Oman stock market had a high number of IPOs and right issues in 2008 which enhanced the stock market.
The Muscat Securities Market (MSM) acquired 20% additional share in the Muscat depository company in 2008.
The MSM 30 has recorded a continuous growth since 2004 at 3375.05 til it reached 9035.48 in 2007, the highest index since the Oman securities market begun operations. Petroleum, Fish, metal, textile
Commodities Market Bond Market It slowed down in 2008 due to the global financial crisis, where the index saw a 39.8% decline
This drastic decline affected almost all the sectors of the stock market.
The worst hit was the industrial sector which dropped 46.9% (2008: 4321.64 from 2007: 8137.06)
Banking and investment companies sector dropped 46.2% (2008: 6620.92 from 2007: 12312.8)
Services and insurance sector declined 28.5% (2008: 2527.87 from 2007: 3533.14)
Number of listed companies had a negative trend in 2008
3 companies was de-listed
RO80 million were issued in 2008 after 3 years of non-issuance The outstanding value of bonds in 2008 was RO 352 million
Commodity exports in 2003 increased by 4.4% over 2002 RO4486.6 million, and include both oil and gas exports and non-oil exports. exports reached RO 9.51 billion 29.6% decline in 2009 comparing to 2008
RO 9.61 billion in 2009
Money Market DERIVATIVES MARKET STOCK FUTURES INDEX FUTURES OPTIONS DEBT INTEREST RATE COMMODITIES NOT FULLY EMBRACED WITH THE TRADING OF DERIVATIVES Volatility of the market 26% increase in total premiums in 2007
9 foreign insurers and 11 national insurers
16 insurance brokers
Annual growth rate is 15% annually Highest in the middle east Commercial banks and the government play the major players.
Main traded is with US dollars (oil revenues)
90% of all foreign currency was in US dollars in commercial banks
Financial Rules & Regulations Capital Market Authority (CMA) Issues licenses to market players
Regulatory arm for the insurance sector takaful both locals and foreigners both countries represent a potential to the world investors they are between emerging and developed markets in a highly regulated region derivative market in the region is highly potential in the region, but with limited market scope both financial markets have been growing steadily except that they went through a cushion in 2006 & 2008 an Islamic system of insurance both the insurer and the insured enter into a unilateral contract instead of the conventional bi-lateral contract.
Let’s look at some of these financial analysis Larger Part of UAE export reached: 13649.8 Central Bank of Oman (CBO) issues the Certificate of Deposits CBs) financial deposit instrument helps maintaining the health & stability of money market