Uncertainty excites foreign investors in UAE markets

Markets Update: Foreign investors bought Dh439 million worth of shares on the Abu Dhabi Securities Exchange and Dubai Financial Market since the start of the year.

Hot money is returning to the local bourses.

Foreign investors bought Dh439 million worth of shares on the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) since the start of the year, market data shows. The figure is a marked increase from last year's Dh5.5m for January, and comprises 30 per cent of total shares purchased by foreign investors for all of last year.

"It's all about positive uncertainty rather than negative uncertainty," said Mohammed Ali Yasin, the managing director at National Bank of Abu Dhabi's brokerage.

Aldar and Sorouh will separately hold board meetings today to "discuss update on the potential merger", the two developers said in respective filings published on the ADX. Investors envisage a tie-up that would create a company worth more than US$15 billion in assets as an important requirement for the revival of the property market.

"The more important aspect is the outcome of it and how it will affect the real estate sector, and what business lines the merged entity will operate," Ali Adou, a portfolio manager at Abu Dhabi's The National Investor told Reuters.

Aldar and Sorouh originally announced their intention to investigate a merger last March after both firms were hit hard by the property downturn in Abu Dhabi. For much of the time since then the companies' share prices have moved in tandem as investors anticipate the long-awaited merger.

Abu Dhabi's Government last week announced Dh330 billion in spending plans to build homes, schools and vital infrastructure work, considered another catalyst to boost investor confidence.

Another key requirement, a conclusion of Dubai's debt saga, is thought to be in the works.

Last week, it emerged that Amlak had been in talks with a six-member creditor committee to tackle Dh7bn worth of debt. Amlak's shares have been suspended since the 2008 global financial crisis cut access to cheap credit and wiped asset values.

Tamweel, another mortgage provider, is about to undergo a full takeover with plans to de-list from the Dubai Financial Market. Dubai Islamic Bank (DIB) said it would offer Tamweel's minority shareholders 10 shares for every 18 shares of the mortgage company's shares held by them.

The move was welcomed among investors who saw DIB stepping in to offer full support of Tamweel. Tamweel's shares were suspended from trading in 2008. They resumed trading in May 2011.

The UAE economy, steaming ahead as the West struggles, was expected to have grown 4 per cent last year, Sultan Al Mansouri, the Minister of Economy, saidlast week.

The return in investor interest comes as Europe grapples with a lingering debt crisis and after US policymakers averted a "fiscal cliff".

The UAE and its stock markets are a candidate for an upgrade to emerging markets status by the international index provider MSCI, whose indexes are tracked by investors with about $7 trillion in assets. The country is currently a frontier market, considered riskier by global investors.

Non-Arab investors bought Dh210m worth of shares in Dubai, and Dh228.8m in Abu Dhabi, market filings show.

They bought Dubai Financial Company, Emaar, Air Arabia, Dubai Investments and Arabtec Holding. In Abu Dhabi, they built up shares in Aldar Properties, Sorouh Real Estate, RAK Properties, Bank of Sharjah and Dana Gas.

The Abu Dhabi Securities Exchange General Index is up 5.1 per cent so far this year, trading at 2,765.82 points. The Dubai Financial Market General Index has rallied 9.3 per cent in the same period. It closed at 1,774.92 on Thursday, the highest level since November 2011.