Jul 17 2011 |
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Brokerages facing the heat as trading activity declines
By Gulam Ali Khan Oman's brokerages are passing through one of their most difficult periods - perhaps even tougher than post the global financial crisis - as low trading volumes, declining trading interest by investors and lacklustre regional markets eat into their profits.Market experts believe that if the current state of stagnancy or declining turnover persists, it might force some smaller brokerage houses to close down operations. Moreover, the business environment in the industry is one that opens up opportunities for consolidation of smaller firms.
Hunaina Banatwala, senior manager for institutional sales at Gulf Baader Capital Markets (GBCM) said that the second quarter of this year has been the worst in terms of trading activity in Oman.
She added, "Currently, weekly volumes are as low as the daily average volumes of last year. It is very likely that even large brokerages may think of cutting costs, jobs or freezing hiring."
Expressing similar views, Lo'ai Badie Bataineh, head of investment management group, Oman Arab Bank, said, "Broking firms won't post profits in current market conditions unless they have other sources of income or businesses which they can rely on."
"Average daily volume has dropped from its peak of 5.4mn in 2008-09 to 2.4mn this year. The market is facing problems in terms of the continuing drop in volumes accompanied by lack of information and disclosures from listed companies."
An investment manager at a government pension fund said that Oman has more than enough brokerages and smaller firms would need to consolidate.
"There is no need for more than ten broking firms in this small market. It is quite possible that in the months ahead some brokerages close down due to high operational cost. There are fears of job cuts as well."
© Muscat Daily 2011
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