Jittery UAE investors look for signs of revival

After a torrid quarter for local stocks, investors look to the year's final three months to repair portfolios and realise returns.

Trading places:Companies expected to move the market this week

Aldar Learn more

Sorouh Learn more

Emaar Learn more

Dubai Financial Market Learn more

The Abu Dhabi Securities Exchange General Index sank to 2,444.07 last week, its lowest since 2009, while the Dubai Financial Market General Index reached a seven-month low of 1,366.34.

"I am not optimistic, but at the same time there are two things that can help the market," said Sebastien Henin, a portfolio manager at The National Investor in Abu Dhabi. "Oil has been resilient, with Brent trading at an average of US$110 last week, while valuations are cheap and should give strong support."

There are many reasons for investors to stay nervous this week. Corporate earnings reporting season is under way, with property companies and banks expected to show the extent to which the market continues to decline.

The country's most actively traded property stocks, Aldar Properties, Sorouh Real Estate and Emaar Properties, dropped to all-time lows last week after Arqaam Capital, based in Dubai, said property prices and rents might fall a further 20 per cent this year because of excess supply.

Foreign investors were net sellers last week, with outflows reaching $1.1 million for Aldar, $1.4m for Sorouh and $1.7m for Emaar.

Dubai's property market experienced one of the world's biggest declines after the global financial crisis, with home prices dropping 64 per cent since they peaked in mid-2008, according to estimates from Deutsche Bank.

Abu Dhabi will continue to have an excess of most types of properties, leading to a further decline in rents and sale prices, according to a Jones Lang LaSalle report published last week.

"Genuine revival triggers will only appear in a broad macroeconomic recovery, via job creation, a rise in discretionary spending, continued regulatory evolution, resumed mortgage lending and growth in tourist flows," Mohammad Kamal, a property analyst at Arqaam, said in a note to clients.

A consensus of analysts expects Aldar to publish a third-quarter profitof Dh139.8m, 119 per cent increase, and Sorouh to post a Dh129.6m profit. But these would be well below profits of the boom years, and investors are concerned about next year's outlook.

"The country is still suffering from a property crisis and no sign of improvement in the short or medium term," Mr Henin said. "Visibility is not good."

For banks, analysts are expecting earnings to be stronger, with the consensus expecting an 83 per cent increase in net profit for Emirates NBD. But shares are unlikely to outperform amid muted market activity.

Emirates NBD's shares sank to multi-month lows when the bank was ordered by the Dubai Government to take over struggling Dubai Bank. Analysts said the lender was big enough to cope with the deal.

Investors are watching Europe's summit, scheduled to begin today, as policymakers will try to hammer out a plan to address the region's debt crisis.

"I don't know if we can put a lot of hopes in European leaders to fix their problems quickly," Mr Henin said. "The best strategy right now is to increase your cash - to be cash rich."

Saudi Arabia's stock market moved 0.04 per cent to 6,108.94 yesterday after state TV announced that the kingdom's heir to the throne, Crown Prince Sultan bin Abdul Aziz Al Saud, had died abroad after an illness.

Elsewhere in the region: Kuwait's index advanced five points, or 0.08 per cent, to 5,895.80 for the week; Bahrain's declined 0.6 per cent to 1,144.29; Oman's MSM Index rose 2.35 points, or 0.01 per cent, to 5,531.67; and Qatar's QE Index declined 0.7 per cent to 8,362.59.

halsayegh@thenational.ae