AMMAN -- A 69.2 per cent drop in the net income of the United Financial Investment (UFI) may be signalling lower profits at financial brokerages and firms that relied on stock investments at the bourse last year.
According to UFI Deputy General Manager Jamal Al Amad, the 32.64 per cent decline in the index of the Amman Stock Exchange (ASE) last year will not only mar the financial results of many companies listed on the ASE but also cap the expected rise of share prices this year.
"The bourse has bottomed out and the only course in 2007 is upwards. But, bleak 2006 financial reports of public shareholding companies that will be coming up in the coming few months are likely to limit any surge to around 20 per cent," he said.
"Certainly the ASE index will be above the 6,000 mark," Al Amad added.
UFI, the first company to provide the Jordan Securities Commission (JSC) with its preliminary 2006 financial results, posted a JD1.16 million net income compared to JD3.9 million in 2005.
The company's disclosure report showed JD2.03 million net earnings last year, 64.7 per cent down from JD5.75 million in 2005.
The trade volume on behalf of clients amounted to JD764.51 million, whereas commission income stood at JD2.26 million.
During 2005, the trade volume reached JD1.38 billion and commission income amounted to JD4.63 million. As a result, the company raised its capital from JD2 million to JD5 million and distributed three million bonus shares from retained earnings to shareholders.
UFI ranked 14th among 58 ASE brokerages last year in terms of trade volume brokered compared to its 9th ranking in 2005.
Despite the lower profit, Al Amad said the company will be distributing dividends at a rate of 15 per cent.
Asked to comment about various practices that could be observed during trading activities, Al Amad mentioned lack of knowledge and proper understanding among investors in general.
Noting that more than 660,000 investors are registered at the Securities Depository Centre, he pointed out that around 80 per cent participate in share trading without real awareness of company results and scientific evaluation.
"Unprofessional individuals rush to buy shares and stocks based on unfounded information or to imitate others and simply join the crowd," he said.
To support this observation, the deputy general manager added that there is no purchase selectivity in the stock market, where investors value the shares in terms of profitability, financial soundness productivity and sustainability.
"To the contrary, all the market moves up or all the market moves down, with a few exceptions," Al Amad said.
He stressed that insurance companies and other firms whose main line of business is not related to investment should seek professional help from experts or outsource their portfolios to specialists who can handle their funds and stock holdings in a better way, in order to maximise their profits from investments.
By Samir Ghawi
© Jordan Times 2007
