x Abu Dhabi, UAEMonday 22 January 2018

Abu Dhabi banks rise on positive quarterly earnings expectations

Markets Update: Gains in the banking sector push Abu Dhabi stocks upwards, as traders position themselves ahead of Q1 earnings releases this month.

Positive earnings expectations sparked a rally in Abu Dhabi's banks this morning, leading stocks in the capital higher.

The Abu Dhabi Securities Exchange General Index gained 0.19 per cent to 2,596.40 in early trading, led higher by two of the emirate's biggest banks.

First Gulf Bank increased 1.87 per cent to Dh16.30 per share, while the National Bank of Abu Dhabi gained 0.97 per cent to Dh10.40. Both stocks are among the largest weightings on the ADX index.

However, the optimism did not filter through to bank stocks on the Dubai Financial Market, which fell 0.83 per cent to 1,544.68, dragged downwards by a 4.4 per cent decline in shares of Dubai Islamic Bank.

Asian stocks were flat overnight, with the Nikkei 225 nudging up 0.07 per cent to 9,591.50 and the Hang Seng index down 0.1 per cent at 24,259.73.

With no strong catalysts driving stocks in either direction, traders said markets could start to creep upwards as risk-taking returns to the market.

"Markets are starting to look a little bit mixed after a strong run up in late March," said Yong Wei Lee, senior fund manager at Emirates NBD. Investors were now in "wait-and-see mode" for first quarter earnings.

However, he added that increasing levels of deposits at UAE banks could lead to a rise in deposit rates, which should bode well for markets as a whole as investors hunt for increased yields.

"Liquidity is coming back into the banking system and that tends to be positive for stocks," he said.

Market activity has increased greatly over the last month, with daily volumes now hovering around 100 million shares traded on each exchange.

With the second quarter of the year now a week underway and earnings for the first three months of the year starting to filter through to markets, companies around the Gulf could soon start to see movement, starting with Qatar's banking sector.

"Q1 results are starting to arrive, and Qatar National Bank had quite good numbers so we expect the Qatari market to be a bit buoyant," Mr Lee added.

Yesterday, QNB posted a 35 per cent rise in net profits for the first quarter to 1.7 billion Qatari riyals.