UAE markets pull back; Bahrain hits 3-year high

Reuters/Dubai

Stock markets in the UAE retreated from multi-year peaks yesterday, while Saudi Arabia edged up and Bahrain’s benchmark hit its highest level in three years.

Dubai’s main index slid 0.9% in a volatile session during which was down as much as 4.0%. Emaar Properties was the main drag after its annual meeting on Wednesday dashed some investors’ hopes for a 2013 dividend hike beyond the board’s proposal; the stock fell 1.4%.

Other property and construction stocks also fell, with the exception of builder Arabtec Holding, whose shares were extremely volatile but closed up 0.3%.

Arabtec soared 10.7% on Wednesday after the company outlined ambitious expansion hopes and presented new projects at a major real estate exhibition in Abu Dhabi. But analysts said the stock’s dynamics had become unpredictable and it had surpassed some major brokers’ fair value estimates.

Apart from Arabtec, the only major stocks to rise yesterday were lender Emirates NBD and bourse operator Dubai Financial Market, up 1.0% and 0.5% respectively after both companies reported strong first-quarter earnings.

Emirates NBD, Dubai’s largest bank, said yesterday that first-quarter net profit rose 25% to 1.04bn dirhams ($284mn), while analysts had expected 904mn dirhams on average.

DFM also beat expectations as quarterly net profit surged eightfold to 215.1mn dirhams. Analysts at HSBC and Global Research had expected 202mn and 109mn dirhams.

The Dubai market has risen some 50% this year, making it the world’s best-performing stock market, and many fund managers think a downward correction is due sometime in coming months. Yesterday’s volatility could be a signal of that, but so far, bullish retail investors have always come in to buy on dips. So it is not clear if any sustained pull-back is starting.

“I think in the case of Dubai the market has risen very sharply without any significant correction and the correction was due,” said Shakeel Sarwar, head of asset management at Securities & Investment Co (SICO) in Bahrain. “It was amplified by the fact that most investors are retail and leveraged.”

Sarwar said he expected more volatility in the future, although the index, now at 5,088 points, was likely to rise further and aim for 2008-2009 levels above 6,000 points.

“Almost all international markets have breached their 2008 highs while most of the regional markets are still on average 25% below their 2008 highs. Hence the positive momentum in the regional markets may continue,” he said.

In Abu Dhabi, developer Aldar Properties, down 6.1%, was the main drag on the UAE capital’s index which slipped 0.8%.

Shares in First Gulf Bank rose 1.1% after it posted a 27% rise in first-quarter profit to 1.33bn dirhams, exceeding an average analyst forecast of 1.23bn dirhams.

Saudi Arabia’s bourse ended a three-day streak of declines and edged up 0.1%. Food producer Almarai was the main support, rising 4.7% to 67.50 riyals after NBK capital raised its fair value estimate for the stock by 5% to 78riyals.

Shares in Kingdom Holding, the investment firm owned by billionaire Prince Alwaleed bin Talal, which this week reported a 14.8% increase in first-quarter net profit, jumped 8.0%.

Bahrain’s bourse hit a three-year high of 1,419 points, gaining 1.4% on the back of Arab Banking Corp (ABC), which jumped its daily limit of 10%.

Sarwar from SICO Bahrain said relatively cheap valuations of Bahraini companies were attracting bargain-hunters who were not afraid of low liquidity in the local market.

“ABC is the cheapest banking stock in the region at 0.5 book value,” he said. “It seems that after a long time, there is some genuine buying interest from investors, both local and regional, and I think that will continue. All you do (as a trade-off) is compromise on liquidity.”

Elsewhere in the Gulf, Kuwait’s index slid 0.07% to 7,448 points, while Oman’s measure slipped 0.1% to 6,773 points.