Real estate stocks reverse slump as UAE bourses recoup Dh19.5b

After seven straight days of frenzied selling, much of it on the Dubai Financial Market which plunged 37 per cent, UAE shares rose on Monday to provide some much-needed relief to investors and traders. The combined value of shares went up by Dh19.54 billion.

The benchmark Dubai Financial Market General Index soared 161.41 points or 8.15 per cent to close at 2,142.85, with a surge in real estate stocks which, despite trading at cheap prices, have borne the brunt of the massive sell-offs.

Volumes jumped 97 per cent to 466.64 million shares with the total traded value increasing 101.31 per cent to Dh741.96 million.

Emaar Properties, the biggest Arab property developer, was the top gainer of the day, jumping 14.98 per cent to end at Dh3.30. The shares, according to Bloomberg, now trade at 3.1 times earnings.

Other stocks which witnessed a strong rally included Deyaar Development, up 14.08 per cent; Union Properties, gaining 14.16 per cent; Amlak Finance and Tamweel, climbing 14.85 per cent and 14.56 per cent respectively; Dubai Islamic Bank advancing 14.96 per cent and Arabtec Construction rising 14.95 per cent.

Banking shares bought

The Abu Dhabi exchange index climbed 3.30 per cent to 2,846.68, with buying witnessed at lower levels of real estate, banking and energy sector shares. Aldar Properties, Sorouh Real Estate, First Gulf Bank and Dana Gas advanced 8.18 per cent, 8.49 per cent, 5.34 per cent and 6.76 per cent respectively.

"The rebound had to happen, but I don't have a reason why it happened today," said Chahir Hosni, director of high net worth sales, EFG-Hermes Holding. "The decline was very sharp and very steep, so the rebound was also expected to be strong."

P. Krishna Murthy, CEO of Dubai International Securities, a division of Al Rostamani Financial Services, agreed.

"When a market falls so steeply for these many days, a recovery is expected," he said. "Fear and panic had overtaken the rational and fundamentals and therefore the market just went on declining. It was not that the whole of Dubai's corporate world was bankrupt."

But analysts differ on whether the market is in the process of the market bottoming out.

"Did we reach the bottom or not, it would be too early to speculate," Hosni added. "In terms of price, it is extremely cheap, and has been that way but that did not stop the stocks from declining before. So there is hope but we have to wait and see until this is confirmed. The rebound should be more than [a] one-day [phenomenon]."

But such a strong upswing is always followed by a bout of profit booking, Krishna Murthy said. That means the market is expected to witness sell-offs in the coming days.

"For sure we are in the bottoming period, for sure the market has to come back to fundamental recognition," he said. "Lot of stocks are available at a throwaway price."

According to Bloomberg, before Monday's gain, Dubai benchmark index was valued at 4.7 times the earnings of its 29 companies and Abu Dhabi index traded at 6.8 times earnings.