Traders at the Dubai Financial Market (DFM)
Watch out closely for the rally on the Damac and Arabtec counters. These bellweathers are due to announce their results shortly - will this stop the stocks' rally? Image Credit: Gulf News Archive

Major UAE real estate sector stocks are on a tear with Arabtec rallying 14.85 per cent and Damac gaining 8.25 per cent for the day.

The wider DFM is in the black by 0.10 per cent, while ADX closed 1.06 per cent higher. The real estate sector has been outperforming the general indices since the lows in March. From the third week of March, DFM has rallied 20 per cent while the DFM Real Estate index is up a staggering 40 per cent,

During the same period, Damac has rallied by an astounding 163 per cent and Arabtec leapt higher by 153 per cent.

There are company-specific and macro-level factors behind the stellar outperformance of real estate stocks. Recently Arabtec had a reshuffle of its top level management - Walled Al Muhairi, who happens to be deputy CEO of the Abu Dhabi sovereign wealth fund Mubadala, was appointed Arabtec chairman, and the hope is that he will speed up the restructuring process.

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Privatization play

On the other hand, Damac shares were turbocharged by rumors of the company being taken private. Maple Invest, a front company of Damac hief Hussain Sajwani, has hinted it is looking at various acquisition opportunities including that of Damac itself.

F a takeover of Damac should not be a big deal for the promoters - and this indeed is the most opportune time. If a takeover happens, it means Sajwani is seeing the worst over for Damac.

On a macro level, the dovish US interest rate policy is bullish for emerging markets. The US Federal Reserve has decided to keep interest rates at the lower bound through to 2022.

This means Fed will not be raising rates till inflation gets above its target. And this could also see inflation overshooting the target before Fed acts. So the dollar basically loses its comparative interest rate differential advantage with currencies like the euro, resulting in a long-term decline.

When the dollar becomes cheaper, UAE assets become more attractive for outside investors. And real estate will be an obvious beneficiary – all of these considerations could be the prompt for the stock rally.

- Vijay Valecha is Chief Investment Officer at Century Financial.

DFM operator pulls off a second quarter profit
Dubai: Dubai Financial Market recorded a 21 per cent increase in revenues for the second quarter to Dh78.9 million compared to Dh65.1 million last year. Net profits reached Dh44.2 million, up 20 per cent increase.

For the first-half, the stock market operator had revenues of Dh181.1 million compared to Dh163.5 million last year. This was split between Dh115.3 million in operating income and Dh65.8 million of investment returns.

“During the first six months of 2020, the DFM’s trading value has exceeded Dh31 billion, a 25 per cent increase,” said Essa Kazim, Chairman. “The second quarter performance clearly indicates the DFM’s resiliency in containing international markets’ volatility due to the repercussions of unprecedented circumstances triggered by the COVID-19 pandemic, with the general index advancing 16 per cent [and] restoring a considerable percentage of its previous decline.”