‘Sell in May and go away…" is the famous financial world adage. But it didn't work with UAE stocks this year.
The saying suggests that stocks tend to underperform in May – this year, however, DFM rallied a stellar 7.37 per cent and ADX gained 8.46 per cent. The gains on DFM were powered by an 8.43 per cent rally for Emirates NBD and an 8.54 increase at Dubai Islamic Bank.
First Abu Dhabi Bank, with a weightage of almost 40 per cent in ADX, jumped 16.43 per cent, helping the index close higher for the month. Reports that First Abu Dhabi Bank's weighting in the MSCI Emerging Markets index could increase helped the rally. A strong rebound in the economy was a significant factor behind the solid performance of UAE equities.
The top gainers in May are Arkan Building Materials (63.39 per cent), Emirates Refreshments Co (59.57 per cent), Abu Dhabi Ship Building (44 per cent), Abu Dhabi National Hotels (40.68 per cent), Emaar Development (30.55 per cent), Easy Lease Motor Cycle (29.40 per cent), National Corp for Tourism & Hotel (24.78 per cent), Ras Al Khaimah Cement Co (23.94 per cent), Amlak Finance (21.40 per cent) and Bildco (21.15 per cent).
Arakan shares rallied on an offer from Senaat to merge the company with Emirates Steel to create UAE’s most integrated steel and building materials company. The deal would give Arkan a valuation of Dh1.4 billion and is part of UAE's strategy to create national champions in different areas.
ADSB gained as the company signed a contract to build four Falaj Class-3 offshore patrol vessels for the UAE Ministry of Defence and Navy. The deal, the biggest received by the company, will have a total programme value of Dh3.5 billion. This order is quite substantial for ADSB, which had annual revenue of Dh241 million in 2020.
Abu Dhabi National Hotels, which rallied 40.68 per cent in May, and National Corp. for Tourism & Hotels, which rose 24.78 per cent, are excellent plays on the reopening of the economy, particularly Abu Dhabi. Tourism is a priority area, and the industry has grown at a pretty fast pace during the past decade.
Mega-projects like Al Qana, National Aquarium, Sheikha Fatima Park, Yas Bay, and The Waterfront will significantly improve the visitor experience. Abu Dhabi National Hotels and National Corp for Tourism & Hotels are good proxies for the Abu Dhabi economy. During the first quarter, Abu Dhabi National Hotels' net profit rose by 154 per cent compared to last year.
Easy Lease Motor Cycle, which rose 29.40 per cent, also benefits from the normalization of the economy. It is a leading name in motorcycle rentals that provides ready-to-go leasing solutions for fleet needs.
With the pandemic having inflicted significant damage, many companies might not want to incur fixed costs on their motorcycle fleets and even on their maintenance and other overheads. This scenario should be a tailwind for Easy Lease.