Dubai Group $6bn debt deal as DFM soars to four-month high

Debt agreement was with about 30 banks, ending more than three years of negotiations, Bloomberg reported.

The Dubai Financial Market reached a four-month high as banks reported annual profit growth. Jeffrey E Biteng / The National

The Dubai Financial Market recorded its biggest gain in four months yesterday amid reports of the conclusion of a key US$6 billion debt deal in the emirate.

Expectation of strong earnings growth also helped to propel shares 3.6 per cent higher as investors bet on a strong earnings season.

Dubai Group, the investment company owned by the emirate’s ruler, signed a $6bn debt agreement with about 30 banks, ending more than three years of negotiations, Bloomberg reported, citing unidentified bankers. Dubai Group wasn’t immediately available to comment.

United Arab Bank and National Bank of Fujairah set the tone for what some analysts expect to be a bumper quarter, posting record earnings.

Investors are optimistic ahead of a series of earnings reports due to be released, according to Sanyalak Manibhandu, a senior analyst at the National Bank of Abu Dhabi.

“It’s a market that’s going up ahead of results of earnings next week,” he said.

Gains were led by Shuaa Capital, which surged 11.71 per cent, and Mashreq Bank, which increased by 11.39 per cent.

Mr Manibhandu believes investors are taking a particularly bullish view of banking stocks.

“Banks are likely to announce growth due to reduced impairment, and they’re expecting loan growth to increase … so we are going to see net profit driven by improved balance sheet momentum,” he said.

Arabtec gained 9.79 per cent, while Drake & Scull International (DSI) rose by 4.64 per cent.

“Contractors [have] shown over the course of 2013 for the first nine months that they’re able to start jobs quickly,” said Mr Manibhandu. “Both DSI and Arabtec had jobs in hand that were delayed in execution for one reason or another – but [this year they’ve shown that] they’ve been able to get new jobs and start [them] quickly.”

Arabtec’s gains follow the announcement of Dh13.4bn of contract awards in the past three months, which have pushed up its backlog to Dh40bn – its highest level so far.

Credit Suisse, in a recent report on Arabian Gulf equities, recommended a “stock-selective approach” to UAE equity markets, but singled out Arabtec as a “high-quality growth name”.

The Abu Dhabi Securities Exchange closed up by 1.68 per cent, led by Abu Dhabi Ship Building, which gained 14.78 per cent. The company’s share price has increased by nearly a third since Tuesday.