Arabtec shares recovery pays off for Dubai Financial Market

Khadem Al Qubaisi, the chairman of Arabtec, assuaged investors’ fears with a pledge the company will focus onits core business. Ravindranath K / The National

The Dubai Financial Market rose for the fourth day in a row on yesterday, as investor confidence in the construction company Arabtec continued to revive.

However fund managers warned that the market is likely to remain volatile in the near future, with little in the way of fundamental catalysts to drive the market much higher.

The Dubai Financial Market DFM was yesterday's best performing bourse worldwide, with a rise of 4.4 per cent, closing up 193.93 points at 4,593.57. The bourse has risen 16.5 per cent so far this month, clawing back some of the territory lost in June.

“There have been some large buyers in the market in the past days,” said Khaldoun Jaradat, the head of Brokerage House Securities in Abu Dhabi. “It may well just be that those big sellers that sold off their shares when the market was going down last month are now simply buying back at a lower price.”

As before, the bourse took its cue from Arabtec, which posted its fourth consecutive day of growth. The company’s shares rose 14.7 per cent to finish the day on Dh4.04, their highest close in more than two weeks.

Having shed Arabtec stock in their droves last month, investors continued to draw reassurance from the company’s assertions, made in a press conference on Wednesday, that it would press ahead with current projects and would focus on its core business.

The company was further buoyed this weekend by the news that its ambitious joint venture with Samsung Engineering is still in place, and that it would benefit significantly if Samsung were awarded a US$3.5 billion contract to build an oil refinery in Fujairah.

Since hitting a five-month low of Dh2.61 at the end of June, Arabtec shares have risen by 54.7 per cent.

The company’s shares had a knock-off effect on other shares yesterday, with Union Properties, the Dubai Financial Market (the company that runs the bourse), and the investment company GGICO all rising by more than 10 per cent for the day.

Fund managers are not convinced about the staying power of current bull run, pointing out that there had been no fundamental developments in the market that would fuel an extended rise.

At yesterday's close, the Dubai index had a price-earnings ratio of 18.4, compared with the Qatar Exchange Index's 15.3, the Abu Dhabi index's 14.3 and the MSCI Emerging Markets Index's 13.5. (Price-earnings ratio shows how many years of profit per share would be required to cover the market cost of one share; the lower the figure, the better the value).

While investors had taken some heart from developments such as Arabtec’s reassurances and the strong performance of the Dow Jones Industrial Average in New York, there was little going on the ground in the UAE that could justify a continued rise in the market, according to Mr Jaradat.

The DFM had experienced plenty of short selling in the past month, with price rises in recent days possibly attributable in part to short covering, according to Tariq Qaqish, the head of asset management at Al Mal Capital.

“I don’t see lots of catalysts coming in to move the market above the level that we’re at now,” he said.

“I think there will be resistance tomorrow or day after, and then we’ll see them booking profits. I think it’s going to be very volatile. It’s a wide spread that we’re seeing, and investors could get caught in a very dangerous situation if they’re caught on the wrong side.”

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