Financial brokers are at their best when they’re in tune with the markets, but today’s headlines quickly become old news. The UAE Securities and Commodities Authority (SCA) lists more than 80 different brokerage firms active in the Emirates today. That’s a lot of competition, so to stand out you need to be on top of the information affecting your clients and markets. That means spending plenty of time outside market hours getting up to speed on news from around the world.
Benjamin Franklin said “An investment in knowledge pays the best interest”. But it’s easy to confuse knowledge with information. Where once you’d read the papers, subscribe to a few magazines and keep a stack of well-thumbed books, these days there’s too much information available for you to follow everything. Social media, news feeds, over one billion websites at the last estimate, and an incalculable number of blogs.
More isn’t necessarily better. So how do you sift through the huge array of available information to find what’s really important?
What kind of news are you looking for?
Before we start, it’s worth differentiating between types of news. On the one hand, you need to keep up with the hard data – facts, figures, trends, major events – but you also need to stay abreast of industry insights, opinion and commentary. Both are important, so try to maintain a balance.
Any broker worth their salt won’t need reminding to read the news feeds of the major global exchanges – such as the FTSE, Dow Jones and Nasdaq – along with the main UAE exchanges, the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM). These are the ‘broad’ reading sources that everyone in the industry reads: you can’t afford not to. But you’ll also need to ‘read deep’, between the lines, to differentiate yourself from the competition and add value for your clients.
Trading in equities
As an equities broker, you’ll already be familiar with the kinds of activity that affect the prices of financial instruments. But it’s important to think global, because a good or bad run for certain stocks or sectors on one side of the world will have implications elsewhere.
The New York Stock Exchange (NYSE) opens for business at 9:30am EST, by which time markets in Asia and Europe have finished trading or are approaching the end of their trading day. So information on ‘after-hours’ trading is valuable. The Nasdaq website is a good example, with its extended hours service covering both pre and post-market activity. The international picture matters. If technology companies in Asia are having a rough time or pharmaceuticals in Europe are struggling, there’ll be a knock-on effect in those sectors elsewhere. A good broker is a broker all the time, not just during local trading hours.
It’s important to pay attention to analyst upgrades and downgrades too. If a major homebuilder is upgraded because of strong demand, it may be a reasonable assumption that others in the industry are experiencing a similar increase. An increased demand for new homes may mean a shot in the arm for related businesses like home improvement companies and furniture makers. It’s not just reading the news that’s important: you need to interpret it too.
Keeping track of fixed income news
As a broker dealing with fixed income investments, the same global outlook applies. Look for news stories from around the world and consider their implications. In recent months, bonds and gilts (UK government securities) have continued to benefit from investor caution around the Trump presidency and the UK’s upcoming Article 50 rollercoaster. On the other hand, increased inflationary pressures on both sides of the Atlantic, along with uncertainty in the trade and foreign policy outlook, mean that fixed income markets may also experience volatile periods in the next year or two.
Back in the Middle East, Gulf Arab monarchies are currently selling bonds to bolster public finances after the slump in oil prices resulted in a strain on government budgets. This is big business. According to Bloomberg, Saudi Arabia, Qatar and Abu Dhabi collectively raised more than $30bn from global bond markets in 2016 to deal with budget deficits.
Staying on top of the news helps you make sense of these different pressures affecting the fixed income markets, which are often interconnected.
Both the ADX and DFM offer lists of data vendors and it’s also worth exploring tools like Tickerchart, a free UAE-specific stock market app. If it’s on your mobile device it’s easier to get into the habit of checking it throughout the day.
Where should FX brokers be looking?
The strength of a currency is a key indicator of economic health and is also sensitive to economic news such as mergers and acquisitions, rating agency actions and political developments. Ultimately, foreign investors are attracted to countries with less risk of uncertainty.
Again, think global. Since OPEC countries account for over 80 per cent of the world’s oil reserves, their use of the US dollar as the standard currency helps keep demand high. However, Iran’s decision announced earlier this year to stop using the US dollar in financial and foreign exchange reports could weaken the dollar while aiding other major currencies.
There are lots of outlets to help you keep up with the ongoing flow of news and its impact on the FX markets.
Dealing in commodities
Talking about oil takes us neatly to commodities. In the UAE oil is the big one, but there are many others – precious metals, diamonds and base metals among them. A good place to start is the Dubai Multi Commodities Centre (DMCC) free zone, established in 2002. The DMCC news pages are a good source of current stories in the region. Also get familiar with the Dubai Mercantile Exchange (DME), the international energy futures and commodities exchange in the Middle East.
Once again, keeping up to date with commodities developments around the world is vital. Look for stories with an insight into what future trends might be. For example, global warming has seen economies cooling towards the use of diesel. Along with steady progress in the development of biofuels, particularly in aviation, it’s worth thinking about how that trend could affect oil markets in the future.
Minding your own business
Keeping up to date with what’s happening in the markets is important, but as a broker, it’s also wise to monitor developments in your own profession. Markets change rapidly, but so do regulations and as you’re responsible for moving your clients’ money around, you need to keep a close eye on rule changes that might affect you or your business.
For example, recent news from the SCA about major changes to fund regulations in the UAE – covering things like the definition of foreign funds and rules on placements – would be worth knowing about. On top of regulatory and due diligence requirements, it’s also worth scanning the news on the outlook for brokers in general. Recent announcements about cuts to commissions, also from the SCA, would have affected many brokers in the region, and remain something to keep an eye on.
You can’t read everything
As a broker you need to read both broadly and deeply, but even with the most well-developed work ethic, you can’t read everything. Fortunately, you don’t have to. Just as you work hard to understand your clients and their needs, it’s also your job to know what you’re looking for and to learn where to find it.
Yes, explore the key sources and pay attention to the major market indices and what’s happening around the world. But most importantly, find the nuggets of information that most directly apply to what you’re doing and give you real insight into your markets. Filter the news sources that are of real use, keep track of them and discard the others.
The internet may have over a billion pages, but it also gives you the opportunity to bookmark and follow good sources. In that way you can separate insight from irrelevance and read smart, rather than just reading more.
By Guillaume Salomon
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