x Abu Dhabi, UAEMonday 22 January 2018

UAE stock market sentiment positive despite correction

Markets Review: Saleem Khokhar, head of equities at NBAD Asset Management, reviews the performance of the UAE's stock markets last month.

First Gulf Bank shares rose 6 per cent last month. Asmaa Al Hameli / The National
First Gulf Bank shares rose 6 per cent last month. Asmaa Al Hameli / The National

Last month, UAE markets corrected in line with global equities on concerns of tapering of the US bond repurchase programme and weak data coming out of emerging economies.

According to the World Equity Index Rankings by Bloomberg, as of the end of June, Dubai - up 39.2 per cent - is ranked third and Abu Dhabi - up 35.48 per cent - is ranked fourth among primary world indexes by US dollar adjusted year-to-date performance.

On June 11 the UAE and Qatari markets were upgraded to emerging market status by the international index provider MSCI, and this will become effective next year.

We expect this to be a long-term positive development. Average value traded on the Dubai Financial Market exchange retreated to US$185 million per day last month, down from the $209m per day recorded the previous month. Sentiment towards Dubai remains on a positive trend, with worries on debt and property easing.

Last month, banking stocks corrected after a strong run on a year- to-date basis. Emirates NBD and Bank of Sharjah declined by 13 per cent and 12 per cent respectively. However, First Gulf Bank was an exception, gaining 6 per cent.

At the system level, banking data for the month of May was released and it showed that liquidity in the system continues to improve. Loans to deposit ratio stood at 91 per cent as against 94 per cent at the end of December. Deposits grew by 6.7 per cent year to date as against 2.9 per cent year to date loan growth. Growth in provisioning is also declining.

Until May this year specific provisioning increased by 5.2 per cent YTD as compared with 11.6 per cent YTD in May last year, reducing by nearly half. We expect this trend to continue and for loan growth to gradually increase to high single digits during this year.

Listed DFM stock significantly outperformed the market by gaining 4.9 per cent in June while the overall DFM index lost 6.1 per cent during the same time period.

Property and construction shares performed well during the second quarter, but in June the sector was weak on profit-taking with Emaar Properties down 13 per cent.

The Dubai real estate index was down by 10 per cent. In Abu Dhabi, the biggest event was the completion of the merger between Aldar and Sorouh at the end of the month. Sorouh shares were delisted from the ADX on June 30. In the construction segment, Arabtec and DSI continued winning new projects across their operating markets.

Arabtec's rights issue subscription was started on June 9 but company management extended the subscription period by 11 days up to July 4 as initial participation by shareholders in the rights issue was low.

Du's performance was flat but Etisalat shares declined by 5 per cent after having climbed 11 per cent in May.

Etisalat reported slight growth in first-quarter net profit supported by strong growth in revenues resulting from increased mobile customers. Etisalat also reported a 4 per cent growth in domestic revenues in the first three months of the year.

Last month, Qtel also announced its withdrawal from the race to acquire Maroctel, leaving Etisalat as the sole bidder.


Saleem Khokhar is the head of equities at NBAD asset management