It jumped 50.5% to 14 billion dirhams
National banks' investments in stocks to the highest level in 6 years
“Central”: Foreign banks’ investments in stocks recorded “zero” between November 2020 and November 2021
National banks raised their investments in stocks by 50.5%, with a value of 4.7 billion dirhams, during a period of one year (between November 2020 and November 2021), bringing their total investments in this item to 14 billion dirhams at the end of last November, and this is the largest growth rate of their investments in stocks since six years, according to the latest data issued by the Central Bank.
The data showed that the investments of foreign banks recorded (zero), during the comparison period.
In detail, the data showed that national banks' investments in stocks amounted to 14 billion dirhams at the end of last November, compared to 9.3 billion dirhams at the end of November 2020, with an annual increase of 4.7 billion dirhams, and a growth of 50.5%.
She pointed out that the banks began to raise their investments in stocks significantly, as of June 2021, to reach their peak last November, with a value of 14 billion dirhams, after recording stability in the previous months, revolving around 9.5 billion dirhams.
Local banks invest in stocks, whether through direct financing to their clients or investments they make through affiliated funds.
In granting funds to their clients, Islamic banks rely on equity Murabahas, where they buy them from the money markets for the benefit of the client, and then the latter sells them and takes in return for them as financing to be paid according to the agreed upon with the bank.
During the past year, the local financial markets witnessed a great momentum, accompanied by more investments and loans granted for the purchase of shares.
Banks’ investments vary and are distributed between bonds, sukuk and securities held to maturity, in addition to their investments in stocks. The total of these different types of investments together amounted to 563 billion dirhams at the end of last November.
The share of shares in these investments is small, and does not exceed 2.5%, given the high risk ratio in them compared to other types of investment.
Banks raise their investments to employ their excess liquidity, whenever the demand for financing decreases or the criteria for granting it intensify, due to market conditions or high financing risks, as happened during the period of the economy’s closure due to the Corona pandemic, while the data shows an increase in the total investments of banks by 24%.
The market value of the local financial markets exceeded two trillion dirhams, including 1.6 trillion dirhams for the Abu Dhabi Financial Market, and the market value of the Dubai Financial Market by more than 411 billion dirhams, according to data from the Abu Dhabi and Dubai markets.
• Banks began to significantly increase their investments in stocks, starting from June 2021.
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