The world has survived the predicted Mayan apocalypse and those who wanted to celebrate the end of the world had another eventful party to remember for the rest of their lives. But by a strange coincidence, the doomsday marked the end of the world for Dubai’s oldest securities firm. A newspaper advertisement announcing the shutdown of Shuaa Securities, Shuaa Capital’s celebrated brokerage business, had an eerie something about it and seemed timed to perfection.

The story of Shuaa Securities has all the pathos of a Shakespearian tragedy, in which the central character ascends the highest point of glory before falling to the ground, so that the depth of the tragedy is dramatised to its maximum potential. Shuaa’s story is also typical of all securities brokerages in the country and has a subplot about the Dubai Financial Market too.

In material terms, the advertisement announced Shuaa’s intention to stop the trading services and cancel its brokerage licence as it advised clients to get their shares transferred to the respective exchanges, settle their cash balances and close their accounts. But in terms of metaphysics, it had a much deeper and more ominous reading.

Trading volumes

Before things came to such a pass, Shuaa had been a pioneer in the local stock market and a consistent front runner. Its two decades of illustrious existence would be a part of the history of the development and growth of the UAE capital market. With trading volumes hitting new lows and brokerage businesses struggling to survive for the past six years, a different end would have appeared forced and arbitrary. For, from around hundred, the number of active brokerage businesses has come down to about half and nine out of the 10 top brokerage houses of DFM have recorded a loss. Dubai’s benchmark DFM General Index is over 80 per cent below its 2005 peak and the DFM itself has been reduced to a ghost of its former self. The inevitable has had to happen.

The DFM trading hall, which once presented a daily picture of celebration and revelry, with the types of housewives and children milling around, carrying investor forms and writing pads in their hands, today looks haunted. The World Trade Centre complex housing the DFM was once choke-a-block with Saudi and Kuwait-registered cars, creating traffic jams and parking problems in and around the area, not to talk about the great demand for seats on flights originating from these countries to Dubai.

There had been days on the DFM when the turnover crossed Dh10 billion on a single day, although sometime it turned out to be plain fraud at work. There were even trading scams involving key stocks. Nomura Securities once termed it as “the great Arabian bubble” as the valuations ruled the stratospheres. There were points in time when the market traded at 40 times earnings, much of which was derived from grossly inflated share values and the financing of speculation.

Phony companies

The picture closely resembled the one that prevailed in the Indian primary market at the peak of the IPO boom in the early nineties when phony companies came to the market, raised millions and vanished into thin air. All that they needed to do was to have a fancy name and a couple of underwriters who were ready to back any proposal in return for a consideration.

Ultimately when the bubble burst, the storm blew the market away and for a long period the term IPO only evoked memories of distress and frustration. Even genuine companies with a proven track record could not tap the market as investors simply shunned the process. Six years of mending have not helped and the market continues to suffer from lack of confidence and credibility. No wonder, after a considerable buildup, the Al Habtoor Group has announced the scrapping of its proposed IPO.

The end of the 13th baktun in the Mayan calendar has only signified the beginning of a new period for the world and hopefully it will prove true for the DFM and its universe as well.