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UAE Shares Poised for Post-Eid Rally
DUBAI — UAE shares are expected to open higher today due to pent-up buying, as investors trek back to markets after a five-day break and test new resistance levels.
The Dubai Financial Market and the Abu Dhabi Securities Exchange will resume trading after the Eid holidays. Last Thursday, shares in both bourses capped the week in positive territory, with Abu Dhabi rising to a 10-month high, propelled largely by steady global markets.
“Historically, the markets open higher after the Eid holidays. There is a good chance that momentum will be sustained, especially if there is continued support from foreign investors,” said Haissam Arabi, chief executive officer of Gulfmena Alternative Investments.
The recent accumulation by foreign funds of what they see as cheap large-cap UAE stocks looks set to continue and is likely to boost share prices, he said.
Investors also will be focusing anew on building positions in the run-up to third-quarter corporate earnings, which many companies should start announcing in the middle of October, said Matthew Wakeman, managing director of cash-and-equity-linked trading at EFG-Hermes.
“The markets have been tracking global markets for most of September, but now investors will be keeping an eye on corporate results. Any confirmation of their expectations of better results will lead to possible higher rallies,” Wakeman said.
Analysts said that index mover Emaar Properties would gain in value on expectations that the Middle East’s biggest property developer will generate new revenue from the scheduled completion in December of Burj Dubai, the world’s tallest building.
Construction heavyweight Arabtec Holding is also a favorite, as most analysts see benefits from its foray into overseas markets, particularly Saudi Arabia. Last Thursday, Morgan Stanley upgraded the UAE’s largest construction firm to ‘overweight’ from ‘equal weight,’ citing potential additional earnings from its Saudi projects.
In Abu Dhabi, attention may turn to Abu Dhabi Commercial Bank. JP Morgan on Tuesday kept its ‘neutral’ rating on the bank, saying possible increases by the Abu Dhabi bank in its loan loss provisions could squeeze its profits.
“Local and regional liquidity is returning to the markets, and this can only be positive for share prices, as retail investors try to acquire a portion of the shares that foreign investors have been steadily buying during the Ramadan period,” said Gulfmena’s Arabi. He added that jostling by investors for limited available stocks will help push up share prices further.
Wakeman of EFG-Hermes cautioned that the markets might consolidate during today’s trading as investors try to breach current resistance levels.
“Some investors may want to take profits, but any correction will be short-lived. The correction could set the tone for new rallies in the days leading to announcement of earnings,” he said.
Meanwhile, stability in global equities markets on Tuesday could help investors overlook a three-day drop in prices for crude oil, the Gulf region’s biggest source of revenue. Oil futures were trading below $70 a barrel on concerns about weak energy demand in China and other key markets.
“The international backdrop continues to be strong. The turnaround for UAE equities remains intact,” said Ali Khan, managing director of Arqaam Capital Limited.
Khan said that aside from the third-quarter earnings results, investor attention will focus also on bigger issues on the domestic front. These include the ability of government-owned property developer Nakheel to settle its $3.5 billion Islamic bond maturing in December and the Dubai government’s sale of the second half of its $20 billion bond issue.
“Investors will be wanting to have more clarity about Nakheel’s debts, while issuance of the remaining $10 billion bond issue will boost investor confidence,” Khan said.
Dubai government officials have said the emirate plans to issue its second tranche of bonds before the end of the year, to help state-owned firms that are struggling to refinance their debts.
The UAE Central Bank snapped up the first $10 billion tranche in February, a step that helped restore confidence in Dubai’s faltering economy.
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