Abu Dhabi: The financial market regulator of the UAE, the Securities and Commodities Authority (SCA), said on Monday it would tighten its supervision of stock markets following the market crash in June.
The market regulator said in a statement that regulations on bank lending against shares will be reviewed and amended if needed. The Authority also set a permanent technical committee to follow up transactions that impact markets to ensure the integrity of trading, and ensure the absence of any price manipulation.
The committee will review sharp market movements and submit recommendations; and monitor statements of CEOs and securities analysts to ensure transparency. It will be made up of members from the authority, the Central Bank, Abu Dhabi Securities Market, and Dubai Financial Market.
According to Mohammad Yasin, managing director of National Bank of Abu Dhabi securities, the move will allow the SCA to get a complete picture of financial transactions on the stock markets, and will hold companies more accountable for any potential misconduct.
“It is a clear message that SCA and the Central Bank have taken active steps to try to ensure that the credibility and the resilience of the UAE stock market, and all the positive momentum that was built over the last two years is maintained and not lost,” he told Gulf News.
He added that the committee will add security and reliability to the market without impacting trade if everyone is trading according to market rules.
The move by SCA follows a period of instability when rough trading in Dubai-listed construction company, Arabtec, helped trigger a market crash.
Shares in Arabtec more than tripled earlier this year to levels far above fair value estimates by fund managers, only to lose over two-thirds of their value later, triggering a crash. About $30 billion of market value was destroyed in eight weeks, although the market managed to partly recover in the last few days.
Yasin, however, commented on the issue saying: “It’s not Arabtec’s fault it’s monopolising trade. People are trading these shares. I think the regulator realised that there are some gaps that need to be strengthened whereby markets should not be vulnerable for one stock movement to take it down or up.”
With Arabtec shares moving from Dh2.35 to Monday’s price of Dh4.20 in only a matter of weeks, Yasin said, that kind of volatility requires vigilance from the markets.
— With inputs from Reuters
