UAE equites posted a mixed performance, with DFM gaining 0.19 per cent and ADX lower by 0.15 per cent for the day.
Arabtec continued its stellar performance with shares jumping by another 14 per cent plus, while Abu dhabi utility giant Taqa shares rallied 11.50 per cent. There were also gains for DXB Entertainments, which rose 6.66 per cent and DFM Exchange, up 2.08 per cent.
With Tuesday’s 11.50 per cent rally, Taqa’s market cap has rose to Dh142.79 billion and within touching distance of UAE’s largest company, Etisalat, which is at Dh146.97 billion. It looks like it is only a matter of time before Etisalat loses the crown of UAE’s largest company to Taqa.
Prospects of Taqa widening its share base and thus attracting a new class of investors have supported the rally.
Among other corporate news, Salama has received regulatory approval to increase foreign ownership limit (FOL) from 25 per cent to 49, while DFM Exchange posted a great earnings report for the second quarter, with profits rising 20 per cent year-on-year.
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One to watch out?
DFM Exchange shares are an interesting play, given the global liquidity unleased by US Federal Reserve and other major central banks. In fact, trading volumes on DFM have mirrored this liquidity. The trading volumes on the DFM main exchange rose sharply during the initial part of the decade after the launch of the Fed's QE programme and reached a peak of Dh115 billion in 2014.
Thereafter, the tapering of Fed reduced global liquidity, and DFM trading volumes had come down sharply to Dh 30.7 billion in 2019.
Now the situation has reversed with Fed and ECB pushing a lot of liquidity into the system. US Fed has expanded its balance-sheet from $4 trillion in the beginning of the year to almost $7 trillion. Mirroring this, DFM main equity market trading volumes have rose sharply from Dh2.29 billion in February to Dh 6.74 billion in June.
On the charts, DFM and ADX are trading above their 50- and 100-day moving averages, maintaining their bullish stance.
- Vijay Valecha is Chief Investment Officer at Century Financial.