The Securities and Commodities Authority (SCA) has urged investors and clients to ignore the rumors and to follow the basic rules of sound trading on the markets as per the technical indices and basic analysis of securities on the markets.
SCA said that, by virtue of the authority vested unto it to protect and safeguard the country’s financial markets, it has taken all the necessary steps for ensuring market safety, including inspection, surveillance, disclosure and corporate governance procedures against public shareholding companies, brokerage firms and financial markets as well as trading activities on the markets, adding this is being done in accordance with the best internationally accredited criteria.
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The SCA said it has followed with keen interest all the rumors and reports recently being peddled regarding the ARABTEC and has demanded from the company to react to the rumors and to provide clarifications to the disclosures it had made against itself and its CEO, adding that the SCA is coordinating efforts to hold a press conference regarding the issue as soon as possible to allay the fears of investors on the company’s projects and to boost their morale in the company’s performance and future plans.
Explaining further, the SCA pointed out that it is currently scrutinizing the level of adherence of local public joint stock companies listed on the UAE markets to the rules of the Commercial Companies Law, the regulations and requirements of disclosure and corporate governance according to the best international practices accredited by the International Organization of Securities commissions (IOSCO), the International Monetary Fund (IMF) and the World Bank.
The SCA assures investors about the resilience and formidability of the operation procedures of UAE financial markets, which it said have been formulated according to resolute legislation system through which the SCA accurately and carefully apply the rules and regulations, monitor market practices through direct, regular and surprise inspections or through highly advanced electronic systems.
It pointed out that detecting violations requires enough time to cross-check all trading activities to ensure whether or not a violation has been committed, collection and presenting of all evidence and documents before taking the appropriate punitive action against the violation according to rules and regulations.
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By GlobalDataIt said voices calling for stopping or suspension of a company from trading its shares on the market cannot be applied as that action can be taken only in certain circumstances outlined specifically by the laws and the regulations. "This does not apply to any case of the companies listed currently on the market as they all play according to laid down rules of listing, disclosure and trading," the SCA added.
Explaining further, the SCA pointed out that the first quarter of the year saw the achievement of record profit of more than AED15billion by companies listed on the UAE market. The figure reflects great performance by those companies, just as it reflects great performance of the economy and strong growth rate of about 4.5% by the national economy.
It said it is expected that the Q2 disclosures will show continuous upward trend in achieving of profit to maintain the good omen for positive market performance that will boost confidence in the markets.
The SCA said upward and downward trends in share prices are normal financial market characteristics. It is therefore expected that, following the record highs the markets recorded throughout last year and in the first quarter of this year, there will be waves of corrections, especially in the wake of the UAE market upgrade by the MSCI index as shares of some companies listed on the index shall be exposed to price fluctuations as a result of new investors, including major financial institutions, entering the market.
This leads to high rise in share prices, exposing them, at the same time, to selling pressure from those institutions and from investment portfolios. That explains the low rate of foreign investment in June compared to the previous month, which reflected in the form of systematic liquidity operations by some financial institutions which exceeded their approved lending capacity and the 4% margin call conducted by brokerage companies licensed to operate margin trading services.
The SCA said international markets are experiencing similar cases as shares of some international corporations slumped as a result of emergency developments or geopolitical situations but quickly bounced back when those situations ceased. This calls for optimism about the situation of companies listed on the UAE markets considering the above explanations.
The SCA said the appropriate actions are being taken against any brokerage company which exceeded its approved lending limit in margin trading. It therefore called for strict adherence by all investors and market clients to the laid down rules and regulations, and to use logic in making investment decisions, avoid rumors, rally round the Price to Earning (P/E) Ratio of companies and to choose good timing for entering and exiting the market. These practices have positive reflections on market transactions, it added.
