Dubai: A lot is happening on the Dubai Financial Market these days as investors line up behind the recent stock listings and blue-chips such as Emaar cruise to near 52-week highs. A turnaround in the making has been enough to fire up the developer Union properties’ stock.
And then there is Gulf Navigation, whose stock price is steaming through having gone up by 400 per cent in the year-to-date. Here too, the fleet operator’s restructuring of its capital base to do away with accumulated losses and the entry of strategic investors is what’s driving the stock.
Then, of course, there is the fresh chatter about an impending IPO. Amanat, the investment firm, confirmed on Monday that it is taking steps towards an IPO for its healthcare unit.
All of which adds up to good tidings for DFM – and its growing base of investors. The DFM general index is up 13.6 per cent since the start of the year, and much of the gains have emerged since May.
According to Kuwait-headquartered Kamco Invest, DFM had the second biggest month-on-month volume gains among Gulf stock markets during May, with Qatar at No. 1. This month, volumes remain at ‘elevated’ levels, with the highest month-to-date volumes of 4.95 billion shares traded on DFM on June 18.
What’s firing up DFM?
“Just about each of the DFM listings since DEWA in April 2022 have seen a run up in their prices,” said Sameer Lakhani, Managing Director at Global Capital Partners.
“(The school operator) Taaleem has delivered the standout performance. In terms of comparing it to the S&P 500 (which is up 15 percent year-to-date), the performances of the Dubai real estate sector and those of the IPOs have been on par - if not higher.
This indicates more investors trading on the DFM, plus growing interest in the valuation metrics of the Dubai stock market.
Among the recent Dubai IPOs, the Taaleem stock had been through rough patch on listing. All that has changed for now, with a decisive boost provided by National Bonds confirming it’s taking a 5 per cent stake in the company. Taaleem, which offered its shares at Dh3, is now running at Dh3.7. (And had even hit Dh3.89.)
Of the other recent listings, DEWA is up 14 per cent from the start of the year, while Salik’s stock has hit 23 per cent up.
“The three previous listings on DFM - Al Ansari Financial Services, Taaleem Holdings and Empower - have seen significant gains at around 38.4 per cent, 24.3 per cent and 18.5 per cent, respectively,” said Junaid Ansari, Director of Investment Strategy and Research at Kamco Invest.
The gains mainly reflect the unique business models that these companies operate, and which offer significant opportunities in the near term."
The ADX is 7.5 per cent down for the year-to-date after riding out a bumper 2022. Analysts are expecting heavy action in the second-half of this year.
Restructure – and be rewarded
Gulf Navigation is an obvious beneficiary from the extended financial restructuring it went through. Same goes for Deyaar, which too has been in some good form after taking out legacy losses. The stock’s gain? 20 per cent since January.
“The DFM General index has seen an upward trend since the middle of March,” said Ansari. “The best performing stocks have been Gulf Navigation, followed by Ajman Bank and Takaful Emarat Insurance, with gains of 110.76 per cent and 58.06 per cent.”
This week, leading Asian stock markets have been in the red, as mixed signals over the global economy’s chances in the second-half of the year percolate. Plus, there is the constant chatter about what’s next from the Federal Reserve on interest rates. Sure, the Fed held its hand this month – but will that continue at the time of their next meeting last July?
More foreign investors
Stock market analysts say that the DFM has through the series of IPOs been able to expand its retail investor base, and simultaneously get on the radar of more institutional funds from overseas.
To a great extent, “The UAE was able to avoid the collateral challenges imposed by higher interest rates due to attracting foreign direct investments and advancing strongly on the World’s Bank ‘Ease of Doing Business Index’,” said Mazen Salhab, Chief Market Strategist MENA in BDSwiss.
We think that the percentage of the foreign investors’ share - which stood at 56 per cent of the trading value in DFM during the first quarter 2023 - was a catalyst in driving many stocks higher (in recent weeks).
And investors will bide their time for the next IPO coming their way...
"15 out of the 35 companies recorded double-digit growth in May and June, with Gulf Navigation being an outlier. The stock gained 168% during the two months due to an elaborate financial restructuring and improved liquidity.
"In H1-2023, June 16 marked the day of the highest trading traded volume of Dh614.81 followed by June 12, which recorded Dh546.32 million in trades. During these months, DFM has rallied to the highest level since August 2015.
"Additionally, DFM announced the offering of futures contracts on its General Index, which includes the most liquid and largest companies. This move was aimed to provide strong diversification and hedging opportunities for both retail and institutional investors, which resulted in driving more professional investors’ participation in the marketplace."
- Vijay Valecha, Chief Investment Officer at Century Financial