UAE stock market centre of attention this week

Egyptian stocks receive boost from decision of US mutual fund to switch funds over to FTSE

Foreign institutional investors' participation in the markets lifted shares on the Dubai and Abu Dhabi stock exchanges.Jeffrey E Biteng / The National

The UAE stock markets will be the centre of attention this week as investors position stocks ahead of third-quarter results after a recent surge in prices and liquidity.

"I am optimistic and I think we will get some good numbers coming out," said Haissam Arabi, the chief executive at the asset manager Gulfmena Investments in Dubai.

"These are the results that will determine and justify whether we should see a rally between now and the end of the year," Mr Arabi said.

Mr Arabi is expecting a 12 to 15 per cent increase in profits for local companies when they begin to release their quarterly reports for the earnings season, due to begin this week.

"It will come from the real estate sector and banks," Mr Arabi said.

The Dubai Financial Market General Index touched a five-month high on Thursday, while the Abu Dhabi Securities Exchange General Index enjoyed six consecutive days of gains as foreign institutional investors participated in the markets.

"The performance has been great so far," said Nabil Al Rantisi, the managing director of brokerage at Menacorp, an investment company in Abu Dhabi. "Volumes have picked up and are higher than average."

Investor sentiment has improved ever since the property sector showed signs of further recovery, boosted by a flurry of commercial activity.

Abu Dhabi-listed Eshraq Properties last week announced the acquisition of a hotel in Dubai Marina from Dubai's Emaar Properties for Dh120 million. The profit generated for Emaar is Dh83m, the company said in a statement to the Dubai bourse last week.

Also last week, Emaar Properties signed an agreement with Iraq's construction and housing ministry to develop projects in the war-torn country. Iraq needs two million housing units immediately and requires 150,000 units annually for the forseeable future, said Mohammed Al Darraji, the construction and housing minister said. Emaar touched a 22-month high during Thursday's trading session, up 1.4 per cent to Dh3.71.

"Emaar has a strong brand name that resonates in the region and the partnership with Iraq validates both Emaar's credibility and Iraq's long-term potential and ambition," said Anastasios Dalgiannakis, the head of institutional trading at Mubasher Financial Services in Dubai.

In Abu Dhabi, negotiations of a potential merger between the two biggest developers, Aldar Properties and Sorouh Real Estate, are in an advanced stage, the two companies said in a joint statement last week.

They have been in discussions over a tie up since March, with the support of the Abu Dhabi Government, in an effort to revive the emirate's struggling property sector.

Egypt's stock market, meanwhile, is likely to take its cue from this week's Euromoney conference, amid anticipation of big deals to help to revive the country's faltering economy.

Top officials including the country's prime minister, finance minister and investment minister will be delivering speeches to encourage "restarting the country's economy," a statement said on Euromoney's website. Encouragingly, the conference is already fully booked.

Last year's event was cancelled after a popular uprising toppled president Hosni Mubarak's government, keeping bankers away.

The EGX 30 Index has rallied 58 per cent since January after parliamentary and presidential elections offered a semblance of political stability for the country.

Egyptian stocks are expected to be further boosted after Vanguard Group, the largest mutual fund in the United States, said it would move six of its international funds to the FTSE index benchmark from MSCI indexes.

Egypt's weighting in FTSE's emerging market index is 0.51 per cent, versus 0.36 per cent for MSCI.

"The Vanguard Group's new investment strategy is expected to pour an incremental US$100m into Egypt." said analysts at the Cairo-based HC Securities in a note to clients. FTSE's Egyptian index is composed of 13 stocks versus only nine in MSCI's.

"Our initial impression is that new buying flows from the Vanguard Group will take place for those stocks which are included in FTSE's index but not in MSCI's: Alexandria Mineral Oils, Ezz Steel, El Sewedy Electric, Orascom Telecom Media, Technology Holding, and Sidpec."