Dubai World Expo 2020: equities look likely to reap benefits

Amer Khan, a director at Shuaa Asset Management, gives his opinion on the Dubai World Expo 2020 bid.

What is likely to be the main impact on equities and earnings of a successful expo bid?

A successful expo bid should have a material, short-term, positive impact on equities particularly in sectors which will most obviously benefit from expo such as transport, construction and real estate. However from an earnings perspective, 2020 is a still a very long way away and I don’t expect a direct material impact on earnings over the near term. Indirectly of course, a win would further improve sentiment and confidence in the UAE – Dubai in particular – and that could boost spending and investment over the coming year which would be a positive for earnings.

Emaar Properties, Drake & Scull International and Arabtec are among the stocks up the most this year. How much of that is down to a positive outlook on Expo 2020?

There is certainly a portion of the substantial year-to-date gains for these stocks which can be attributed to investors pricing in a positive expo outcome. However, I believe the majority of the gains are a reflection of the marked improvement in economic fundamentals on the ground in the UAE, and more importantly that strength showing in company earnings. Emaar’s third-quarter numbers a very good example.

If Dubai is successful, are there any risks attached to hosting the event – for example, a fresh property bubble?

A successful bid would likely solidify a lot of projects and construction plans and that naturally carries some execution risk. However, Dubai has a long and illustrious track record of hosting large-scale events successfully, and usually in a way only Dubai can – I’m certain the expo will be no different. As for a real estate bubble, judgeing by the demand for new projects that we see currently, if real estate valuations did reach elevated levels at some point in the future I don’t think the expo alone would be the only cause.