Picture: 123RF/INK DROP
Picture: 123RF/INK DROP

Arqaam Capital is closing its SA office, a person familiar with the situation said, as the Dubai-based investment bank joins other brokers paring back operations in the continent’s financial-markets hub.

The company, which opened an office in Johannesburg in 2014, said on Monday that it is ceasing research coverage in SA, according to a note to clients seen by Bloomberg. Customers haven’t yet been informed that the office, which employs about 17 people, is closing, the person said, declining to be identified because an official notification on it hasn’t been sent out.

Profit margins for equity trading companies that offer research have been squeezed in SA and other markets by the cost of markets in financial instruments directive (MIFid) II regulations, the growth in passive investing and a fall in trading volumes. It also comes amid an economy that is struggling to expand, with GDP shrinking for a second quarter this year in the three months to end-September.

The shutdown by Arqaam, which focuses on emerging markets, follows an announcement by Macquarie Group in October that it’s closing its cash-equities business in SA. Deutsche Bank’s SA unit has made significant job cuts, while Credit Suisse has also reduced its presence in the country. Citigroup has been leaving some equity research posts vacant and moving other functions, as reported by Business Day in November.

“Its a tough environment,” said Peter Koutromanos, CEO of Johannesburg-based Avior Capital Markets. The reduction in research coverage “is bad for transparency”, he said. “It’s bad for liquidity and price discovery.”

A call to Arqaam’s corporate communications office in Dubai, where it’s a public holiday on Tuesday, wasn’t answered. Jaap Meijer, Arqaam’s MD of equity research in Dubai, didn’t immediately respond to a request for comment sent by text message.

With Sarah Algethami and Paul Richardson

Bloomberg