UNB, ADCB stocks surge amid merger talks in UAE

Dubai: The Abu Dhabi story has been a far cry from that of its regional peers, but only selectively.

Most of the banks such as First Abu Dhabi Bank, Abu Dhabi Commercial Bank, Union National Bank have surged multi-folds ahead of a possible merger, resulting in out performance of the Abu Dhabi index.

Abu Dhabi Commercial Bank has gained 24 per cent to its highest level in 52 weeks of Dh9.15 from a low of Dh7.41 seen on October 23. 

Union National Bank shares have gained 23 per cent since December 2018. FAB has been trading in a range of near to its near all-time high of Dh15.15. FAB had gained 46 per cent in the last 13 months since the merger news was announced. The ADX index has gained 18 per cent in the past 13 months, while the Dubai index has been on declining trend, shedding 25 per cent in the same time period.

“The regional markets underwent an interesting phase as Dubai stocks like Emaar and Emirates NBD got hammered, but banks on the other hand salvaged the show and were the only ones attracting trading,” said an analyst who did not wished to be named.

Analysts advise traders continue to plough money in ADCB and UNB.

“Both banks have been asleep and were trading in the upper range in the recent past. Technicals are hinting near term rally towards Dh6.00/6.30 in UNB and Dh10/13.10 in ADCB in the medium term,” Shiv Prakash, senior analyst with First Abu Dhabi Bank Securities said in a note.

FABS had a technical buy on both the above stocks. The Abu Dhabi index has been one of the better performers in the region, gaining 14 per cent in the past one year. Other stocks such as Etisalat, a heavyweight, has shed more than 2 per cent in the past one year, while Aldar has tumbled more than 28 per cent since January 2018.

Small stocks

Another trend that the market has been witnessing is that retail investors have been chasing small stocks such as Takaful Emarat, Salama Insurance, Union Properties among others,

“Liquidity in the UAE chases small caps because it is a retail market for individuals after all however mishaps with Alphas or blue chips has led investors to worry about hidden “problems” such as valuations which causes impairments among other issues. A high yield stock does not always mean the stock should be bought because there are companies sitting on piles of cash but have no strategy and thus are not sustainable investments for the long term buyer,” said Essam Kassabieh, Senior Financial Analyst – Research Department at Menacorp.