Nabil Rantisi, who sold stocks during the UAE boom, now
oversees orders of roast beef and Yorkshire pudding wraps from crowds including
“Business was getting too slow, and at some point you have
to decide where time would be spent in a more valuable way,” said Rantisi, who
quit his job as the senior vice president of brokerage at Rasmala Investment
Bank in Dubai in June to help start a deli named 1762. The 34-year-old now
works a few hundred meters from where he used to fulfill share orders.
Three years after the Dubai bubble burst, its financial
industry is still in decline and shows little sign of recovery. While the
emirate successfully restructured debt and invested in transport and tourism,
the number of employees in the Dubai International Financial Centre fell to
11,331 in July of last year from 11,436 in 2009.
As trading volume on the Dubai Financial Market plunged 77
percent after 2009, 41 of the 98 local brokerages active in 2008 suspended
operations. Banks from Credit Suisse Group to Nomura Holdings trimmed their
equities divisions. Al Futtaim HC Securities, a Dubai-based broker ranked first
by value traded in July according to the Dubai Financial Market website, said
Jan 4 it would end operations in the UAE.
The crash followed real-estate speculation as government and
state-owned companies amassed about $110bn in debt. Dubai is home to the
world’s tallest skyscraper and palm-tree shaped islands off its coast. By early
2008, the benchmark DFM General Index had risen almost six-fold in five years.
The market value of shares in the UAE is now $97bn, less
than half the $206bn at the end of 2007, according to data compiled by
Bloomberg. Foreign investors have reduced holdings of Dubai stocks amid
Europe’s debt crisis and political uprisings that ousted leaders in Egypt and
Libya. They bought shares worth AED2.8bn ($762m) in the third quarter, down 83
percent from the same period in 2009, according to the Dubai Financial Market
Trading volume in Dubai plummeted to a six-year low even
after state-owned holding company Dubai World reached a restructuring agreement
with creditors in March. The company roiled global financial markets in 2009
when it sought to halt repayments on about $25bn of debt.
The UAE will have to wait at least until June to be upgraded
to emerging market from frontier market status in MSCI Inc. indexes, which
determine the stocks that tracking funds buy.
With little to trade, ex-stockbrokers are running
restaurants, nightclubs and luxury hotels, waiting for a catalyst to reignite
markets. Vyas Jayabhanu, the manager of Al Dhafra Financial Broker, has spent
the past year developing Boutique 7 Hotel and Suites, a four-star Dubai hotel
complete with a bar, a café and soon a nightclub.
Business has been good, Jayabhanu, 35, said in an interview
over coffee at the hotel’s Garden of Eden café. “If you’re bankrupt, you drink
more,” he said. “It’s a win-win situation.” The café sports tables made of wood
imported from Scotland, surrounded by trees and bushes, and offers shisha, the
water-pipe smoked in the Middle East.
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“During the boom you
saw everyone investing more to capture market share,” said Rantisi of 1762, a
reference to the year the Earl of Sandwich supposedly asked for his meat
between two pieces of bread so he could stay at the gambling table. “It was
overdone, and that was the first signal that the cycle was coming to an end,”
he said. “Today is the opposite. People are getting out of the business or
moving to other investments as the market dries up.”
The emirate, which has less than 10 percent of the UAE’s oil
reserves, set up the DIFC, a tax-free business park, in 2004 to attract global
banks, asset managers and insurers to help diversify its economy. Banks such as
Goldman Sachs Group and HSBC Holdings added staff in the region as rising oil
wealth increased demand for financial advice.
Dubai expanded too quickly, said Akram Annous, former Middle
East and North Africa strategist at Al Mal Capital who left the company in
“For now, I’m working on enhancing my personal brand,” the
unemployed 33-year-old banker said. “Maybe I’ll bring a franchise to Dubai,
such as a shisha-based bowling alley, a fusion enterprise of some sort. Or
maybe I’ll start a twitter feed.”
Rantisi’s former company, Rasmala, which has a research
venture with Royal Bank of Scotland Group, HSBC, and Shuaa Capital, the UAE’s
largest investment bank, have all moved away from selling shares to the public.
“We are simply not making any money through brokerage,” said
Jayabhanu of Al Dhafra. “There’s a vicious fight to make use of small volume.
In tourism, there’s something for everybody,” said the broker, who spends much
of his time on the hotel project. “Encouraging clients to trade in this market
condition is not ethical.”
Al Dhafra still operates with four brokers in Abu Dhabi, the
UAE capital that led the $20bn bailout of Dubai, Jayabhanu said. The brokerage
was ranked 30th by value traded in December on the Dubai Financial Market.
“One thing that could boost volumes would be the inclusion
of the UAE in the MSCI Emerging Markets Index,” Georges Elhedery, head of
global markets for the Middle East and North Africa at HSBC, said by email Jan.
4. “Inclusion would have the effect of allowing international Emerging Markets
funds to access this important market.”
The Securities & Commodities Authority, the UAE market
regulator, plans to issue regulations on liquidity providers, short selling and
security lending and borrowing in the first half, Chief Executive Officer
Abdullah Al Turaifi said in November.
“The smart brokers who manage to stick around will
capitalize big time when volumes come back,” Rantisi said. Meanwhile, the
former broker and his partners plan to open a branch of 1762 as soon as this
month in Jebel Ali, another Dubai business district.
“We haven’t hit a wall in sales figures yet,” Rantisi said.
“And business has exceeded expectations.”
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