x Abu Dhabi, UAEFriday 28 July 2017

Catalysts in the near future to shore up UAE markets

The markets continued to perform positively in October, with the banking system benefiting from a continued pickup in economic activity.

Market sentiment in the UAE has improved significantly with several near to medium-term catalysts that should ultimately result in the equity market moving higher, provided that volatility is to be expected should regional tensions rise.

The near-term catalysts include the Dubai 2020 World Expo bid, with votes scheduled to take place on November 27. While the medium-term catalysts include the UAE’s upgrade to emerging-market status by MSCI. These should drive the market through next year and beyond.

Last month, the markets recorded positive returns: Abu Dhabi’s benchmark index rose 0.1 per cent while Dubai’s increased 5.8 per cent. The average value traded on the Dubai Financial Market eased slightly to US$249 million per day, down 7 per cent from September, but the trading value was six times that of October last year.

The banking system continues to benefit from a continued pickup in economic activity. Most banks reported third-quarter results that met analysts’ expectations or were better than forecast. Banks’ profitability was driven by growth in fee income, which was fuelled by economic growth and higher profit margins. Meanwhile, foreign ownership for most banks has increased, with some reaching the threshold limits. The share price of Dubai Islamic Bank increased 9 per cent, Commercial Bank of Dubai rose 8 per cent, and Dubai Financial Market, the only listed stock exchange operator in the region, closed the month 14 per cent higher.

The property and construction sectors continued to perform well on hopes that Dubai would win the bid to host Expo 2020, as well as the increased profitability of companies such as Emaar Properties and Deyaar. Emaar announced a third-quarter net profit of Dh581m, exceeding the consensus estimate by almost 50 per cent. The results were mainly driven by the ongoing strong performance of the retail and hospitality sectors and delivery of projects despite seasonality factors.

Last month, the Dubai Land Department increased the property transfer fee to 4 per cent from 2 per cent. Meanwhile, the Central Bank also announced new mortgage rules for property investors.

Arabtec announced that it had completed the acquisition of the remaining 45 per cent stake in Emirates Falcon Electromechanical as part of its expansion plans.

The telecoms operator Etisalat reported a third-quarter net profit of Dh1,825m, slightly below market expectations, while du’s net profit for the same period met market expectations. Despite its profit decline on a year-on-year and quarter-on-quarter basis, Etisalat reported positive growth in its UAE revenues (up 13 per cent year on year), and a higher contribution to the group Ebitda (earnings before interest, taxation, depreciation and amortisation).

DP World reported third-quarter consolidated throughput volume of 6.7 million twenty foot equivalent units, a 3.3 per cent year-on-year decline.

The regions that recorded growth were the Americas, Australia, Europe, Middle East and Africa. However, the Asia Pacific and the Indian subcontinent witnessed a decline in throughput volume inthe quarter, reflecting challenging market conditions. The management of DP World reiterated that they expect full-year volumes to be in line with 2012. The stock rose 4.6 per cent in October.