x Abu Dhabi, UAEThursday 18 January 2018

Investors hoping for wins in property sector

Speculation that some companies may have secured new contracts could spur share buying activity.

Investors will be watching the property sector closely this week after speculation that some of the industry's bellwethers will win contracts.

Drake & Scull International and Arabtec Holding are among the names that have been linked to project awards and traders are waiting for signs of deals emerging.

Both stocks had a tumultuous week last week in terms of their share price performance.

Arabtec fell 2.46 per cent, the most in almost two weeks, the day after news emerged that the Emirates Securities and Commodities Authority, the country's regulator, had suspended its chief executive, Riad Kamal, from trading for six months.

But the UAE's biggest publicly traded construction company, bounced back, gaining 5.15 per cent to end the week on Dh2.04.

Yazan Abdeen, a fund manager at ING funds, said: "The smart thing [for Arabtec] to do right now is to bid on new projects in Saudi Arabia and Qatar."

The engineering and contracting company Drake & Scull also saw a significant surge in its share price last week, notching up gains of 10 per cent. It ended the week at Dh1.10.

Some analysts said the increase could be linked to speculation that the company had won a project in Saudi Arabia worth US$300 million.

The company is expected to re-test its all-time high at Dh1.22 during this quarter, said Amjad Bakir, the trading manager at Wafa Financial Services.

Rumours that Aldar Properties will secure government funding are also still circulating. The company said it would receive help at the end of last year to plug a debt gap but failed to meet its first deadline on the bailout talks.

It is now the new target, said Roy Cherry, a property analyst at Shuaa Capital. "Speculation on when and how [it will secure funding] will remain the key driver for the stock in the days ahead."

But the rumours, which intensified in November, remain market chatter, according to Mohammed Khaled, a relationship manager at Prime Securities.

"Word of mouth is very common. But if it is about to finalise its debt issues, Aldar is going to go up and all the others will follow," Mr Khaled said.

Analysts expect Aldar's share price to rise above Dh2.90 if an announcement is made, providing a short-term catalyst to the market. It closed 2.59 per cent higher at Dh2.38.

If Aldar announces a resolution this week, the market will see a surge of activity, Mr Khaled said.

Persistent low volumes on the UAE's two main exchanges, the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX), suggest institutional investors are holding fire in the absence of any conclusive positive news.

"It gives you an indication that investors are day traders, not foreign institutions. They are depending on technical factors backed by analysis in order to play it safely rather than fundamentals," said Mr Khaled. Volumes on the DFM were about 61 million, and 72 million on the ADX, still well below levels of at least 300 million before the onset of the financial crisis at the end of 2008.

Turnover on the DFM declined almost 60 per cent last year compared with the previous year, to the lowest in six years, the exchange's annual report said on Wednesday.

The value of shares on the bourse slumped to Dh69.7 billion from Dh173.5bn a year earlier.

The DFM gained 1.24 per cent to 1,668.68 points at last week's close and the ADX rose 0.41 per cent to 2,752.33 points, partly fuelled by higher oil prices. Crude for February delivery was trading above $90 a barrel for much of the week, before slipping to about $88 a barrel on Friday.

But optimism ahead of full-year results is lacking, analysts say.

"Everyone is expecting disappointing results," Mr Abdeen said. "The smart guys will leave before the results come out." He said that until then the market would be relatively upbeat as analysts said much of the bad news had been priced in.

Full-year results are not due until about the end of this month or early next month but market observers do not expect they will mirror third-quarter results from last year.

Listed companies reported a 16 per cent gain in profits in the third quarter compared with the same period a year earlier, and a 3 per cent increase on the second quarter of last year, according to Markaz, a Kuwaiti investment company.