x Abu Dhabi, UAEMonday 22 January 2018

Bargain hunters revitalise market

The Dubai Government's announcement of an anti-corruption drive is helping to revive the emirate's equity market and stem share decline.

Road to recovery: Tamweel rallied after leading the share dive when its former chief executive was questioned by the police.
Road to recovery: Tamweel rallied after leading the share dive when its former chief executive was questioned by the police.

The Dubai Government's announcement of an anti-corruption drive helped revive the emirate's equity market. On Sunday the share dive was led by Tamweel, whose former chief executive has been questioned by police, but yesterday the Islamic loan provider regained some lost ground, rising 3.6 per cent to make up most of the previous day's losses.

Overall, the Dubai Financial Market (DFM) was up 0.47 per cent closing at 5012.31, just above its psychologically important 5,000 level; Abu Dhabi closed up 0.53 per cent to end at 4558.04. Abu Dhabi was led higher by a surge in property shares, which have endured a couple of weeks of decline following a Morgan Stanley note earlier this month that predicted a ten per cent decline in the next two years in Dubai property prices. Abu Dhabi listed property firms are heavily exposed to the Dubai property circuit.

The capital's largest developer, Aldar, which has dropped in value by more than 10 per cent since the report was released, rose 2.4 per cent to Dh10.50 (US$2.85), while rival Sorouh saw a one per cent gain to close at Dh7.90. Dubai's index has dropped 7.3 per cent this month, while Abu Dhabi's is down 8.4 per cent. Walid Shihabi, head of research at Shuaa Capital, said the market was reaching a plateau following weeks of decline, and expected a recovery to begin by September or October.

He dismissed the belief that little market activity took place during Ramadan, which is due to start on Sep 1 and runs until Oct 1. He said the concept of seasonal markets was outmoded. The Muslim fasting season was traditionally a positive month for equities, he added. Mr Shihabi attributed yesterday's rise to bargain-hunting investors seeing the opportunity to snap up underpriced stocks, and sounded a note of caution: "Investors are finding these stock prices appealing, but that doesn't mean the volumes we are seeing are significant improvements - this is not yet a recovery with legs. Liquidity levels in the market are not improving."

Mr Shihabi, however, still believed the market decline had largely run its course and that there would not be many wild oscillations until Autumn, when he expected it to begin to show gains. "[Investors'] concerns [about the market] have now been played out and there is no more room for sizeable declines. Short of very bad news I don't see the market showing any more big declines, although it may go up or down half a per cent."

Mohamed Ali Alabbar, the chairman of Emaar Properties, the largest developer in the GCC, welcomed the Government's tough stance on corruption. "This statement by the Public Prosecutor of the government of Dubai further demonstrates the emirate's strong resolve and unwavering commitment to upholding global standards of corporate governance and ensuring transparency across all business sectors," he said.

"It will encourage everyone to embrace international best practices and will reassure investors in the region and beyond," he added. Mr Shihabi said that despite encouraging government words, investors were still looking for 'degrees of clarity', especially from those companies who were directly implicated in alleged fraud or corruption.