Stock DFM Dubai stock market traders
November provided a welcome return to form for real estate stocks in the UAE. Sector is seen as a likely beneficiary of improved fund flows. Image Credit: Antonin Kelian Kallouche/Gulf News

The Top 5 UAE companies by market capitalization are Abu Dhabi National Energy Co. with Dh167.52 billion, Etisalat (Dh150.62 billion), First Abu Dhabi Bank (Dh137.81 billion), International Holdings Co. (Dh73.03 billion) and Emirates NBD (Dh69.16 billion).

These companies scripted nice gains in November, enabling UAE indices to post a fairly strong performance. DFM rallied 10.59 per cent and ADX rose 6.54 per cent. The gains for the above companies are Abu Dhabi National Energy Co. (6.43 per cent), Etisalat (2.85 per cent), First Abu Dhabi Bank (10.51 per cent), International Holdings Co. (2.45 per cent) and Emirates NBD (15.75 per cent).

A key highlight was the announcement of the Pfizer vaccine with better than expected efficacy. This was a followed by Moderna vaccine with better efficacy than Pfizer and then an Astra Zeneca vaccine. Even though Astra Zeneca's vaccine had comparatively lower efficacy, the news was greeted positively by markets as a step towards the development of herd immunity.

Read More

Primed for comeback

The news is a positive for UAE equities and, of course, government coffers will get a boost due to a faster normalization of the global economy and which will, in turn, lead to a higher oil price. Analysts expect the global economy to reach near pre-pandemic level by the second-half of 2021.

Reflecting the positive sentiments, real estate, banking and airline shares rallied significantly. ENBD REIT was the top performer in the UAE equity market with a gain of 36.65 per cent, while Bank of Sharjah's was 34.12 per cent rally. Arakan Building Materials rose 31.67 per cent, Gulfa Mineral Water was up 31.14 per cent, and Abu Dhabi National Insurance Co. higher by 29.25 per cent.

Reason to be upbeat

Among real estate shares, Emaar Malls rallied 28.87 per cent, Emaar Properties by 22.31 per cent, Emaar Development rose 21.97 per cent and Aldar by 13.43 per cent. RAK Properties experienced an 11.86 per cent upturn, Manazel Real Estate by 10.06 per cent, and Damac closed the month 6.31 per cent higher.

The collective rally is on account of rising global risk sentiments, which will result in more fund inflows to emerging markets. Being a trading, tourism and finance hub, UAE will be on the radar of investors as a "re-opening play". All such reopenings will boost air traffic and so it is no surprise Air Arabia rallied 14.81 per cent in November.

A normal economy means lower non-performing assets for banks. In fact, many of them may be able to write back their provisions, boosting profits for the coming year. This is because of stringent Basel norms, which requires banks to account for expected credit losses (ECL) on a retrospective basis.

In November, Abu Dhabi Islamic Bank gained 9.30 per cent, ADCB rose 5.74 per cent, and Ajman Bank closed in the black by 5.29 per cent. Surprisingly, subdued price action was observed in some of the hotel and tourism-related names. But Abu Dhabi National Hotels, National Corporation For Tourism and Hotels, DXB Entertainment and Al Firdous Hotels should see outperformance in the coming months.

On the charts, DFM and ADX, are trading above their 50-, 100- and 200-day moving averages, indicating bullishness. The global reflation trade finally seems to be on our shores.

- Vijay Valecha is Chief Investment Officer at Century Financial.