Dubai: UAE equity market traders, who have seen underperformance in the local indices, are still indifferent to beaten-down stocks despite a recovery in earnings of heavy weight real estate companies.
The value of Emaar Properties shares have fallen 41 per cent from the high of Dh8.22 seen in September 2017, despite better than expected growth in earnings. Emaar Malls shares have been falling since its listing, when the share price was at Dh3.50, meaning a 44 per cent decline since 2014.
Damac shares have fallen 53 per cent since July 2017. Dubai Investments has been falling from a high of Dh2.66 seen in October 2017, registering a fall of 47 per cent.
“Lack of interest in UAE stocks is due to continuing uncertainty on the real estate outlook and poor earnings by blue chip real estate companies that have further dampened the sentiments and have a major influence on the index,” Nishit Lakhotia, head of Research at SICO — based in Bahrain — told Gulf News.
Earnings of real estate companies have held up reasonably well in what has been an exceptionally tight third quarter. Emaar Properties posted a double digit rise in net profit for the three months to September, while Union Properties recovered from a massive decline in loss during the third quarter last year.
But market participants are not buying that argument.
“There seems to be a doubt if the real estate prices can stabilise in 2019, given the amount of supply that is planned to hit the market while demand continues to be subdued. Further, such a significant oil price decline recently will also discourage investors/traders alike who will not be in hurry to enter the markets,” Lakhotia said.
Even the Dubai index has been falling after witnessing a high of 3,738 seen in January 2017, down 27 per cent. The Dubai index has been trading in a tight range of 2,700-2,850 in the last 15 weeks, with an average traded volume 500 million shares.
The only silver lining has been the outperformance in Abu Dhabi index, which has gained 21 per cent since January 2017 but the outperformance has been only due to bluechips like Etisalat and First Abu Dhabi Bank (FAB). FAB has gained 45 per cent since January 2017. But of late, the Abu Dhabi index has also been trading in a tight range of 4,850-5,000.
Saudi Arabia’s Tadawul index on the other hand has recovered 5 per cent so far in the year, after the index nearly shed all of its gains at one point in October.