Banking stocks listed on the UAE bourses have been untouched by the recent sell-off that adversely impacted real estate shares. They are still holding up because of expectations that further Fed rate hikes may enhance profitability, while a build-up in inventory and sluggish demand has been weighing on real estate companies.
Dubai Islamic Bank has been trading 7 per cent higher from its 52-week low of Dh4.67 compared to Emaar Properties, which has been trading near its lowest level of 2018 at Dh3.67.
Banks in Abu Dhabi too were not left far behind compared to its peers in Dubai, helping the Abu Dhabi index to outperform Dubai. First Abu Dhabi Bank gained 22 per cent since the merger announcement with First Gulf Bank. Traders are expecting similar benefits in Abu Dhabi Commercial Bank, which has gained 27 per cent in the past one year.
Union National Bank, which will also be a part of the merger, has gained 31 per cent since December 2017.
The outperformance in banks has helped the Abu Dhabi Securities Exchange general index gain 10 per cent so far in the year. In contrast, real estate-heavy Dubai Financial Market general index shed more than a fifth of its value since the start of the year.
Traders have been jittery about the possible local impact of any sell-off in global markets. And analysts see a limited impact.
“Trading activity in GCC markets are dominated by domestic institutions and investors,” M.R. Raghu, managing director at Marmore MENA Intelligence, said. “Foreign investors account for a small portion.
“Moreover, the businesses of most stocks are largely confined to GCC region. Thus, the level of integration with global markets remains sparse and we do not see local markets mirroring the meltdown,”
Traders were eyeing what could be in store for Emaar next year even as analysts give a positive picture.
“Regarding Emaar, the stock has been hit by negative sentiment in the UAE market and the slowdown in real estate sector,” said Charles-Henry Monchau, Managing Director — chief investment officer and Head of Investment Management at Al Mal Capital. “But there are also some technical factors, including foreigners exiting the region or just selling emerging markets (Emaar is heavily owned by foreigners).
“We believe the stock is a deep value opportunity, but this value will not be crystalized until we see evidence of a strong growth in the overall economy,”
Emaar continues to maintain a steady launch portfolio and also been aggressively targeting completion of older projects. The company posted disappointing figures in the third quarter to September, registering a 29 per cent fall in net profit to Dh1.1 billion. The bellwether scrip has shed 37 per cent of its value in the past year.