Emaar Development shares drop sharply on first day of trade on DFM

Shares in Emaar Development, which this month raised Dh4.8 billion in Dubai’s third-largest IPO ever, traded sharply lower on their opening day on the Dubai Financial Market (DFM), the first significant share debut on the stock exchange since late 2014.

The real-estate development arm of Emaar Properties saw it shares fall more than 7 per cent at the open yesterday, eventually finishing 4.3 per cent lower at the close of trading.

“On a day when the broad Dubai index of shares was up, Emaar Development’s drop on its first day might have been driven by two factors,” said Hasnain Malik, head of equity research at Exotix Capital in Dubai. “First, selling by flighty retail subscribers to the IPO. Second, institutional investors potentially seeing cheaper access to Emaar Development’s promised dividend stream via the shares of its 80 per cent parent, Emaar Properties, the share price for which was up.

“In any event, Emaar Development management guidance on dividends over the next three years equates to over 25 per cent of its market value at today’s closing share price,” he said.

Emaar Properties shares led big name gainers in Dubai, closing up 2.6 per cent at Dh7.80. The DFM ended 1 per cent higher.

Last week Emaar Development priced its sale of 800 million shares – representing a 20 per cent stake in the company – at Dh6.03 per share, raising Dh4.8bn in the largest IPO at the lower end of the original pricing guidance of Dh5.7 to Dh6.9 per share announced in early November. That was subsequently revised to Dh6.03 to Dh6.70 per share. Institutional investors were allocated 93.8 per cent of the 800 million shares on offer, with retail investors buying the remaining 6.2 per cent subscription, the company said.

A spokeswoman for the company described the offering as “well oversubscribed” but declined to give further details.

Arabian Gulf stock markets mostly rebounded from several days of weakness yesterday, encouraged by strong oil prices, although Emaar Development sank on its debut after Dubai’s first big initial public offering since 2014.

Emaar Development, the local property development unit of Emaar Properties, closed at Dh5.77, down from its IPO price of Dh6.03, which represented its net asset value according to an estimate by the property consultants JLL.

Nonetheless, Dubai’s index closed 1 per cent higher at 3,445 points as Emaar Properties, which had been falling in the days ahead of its unit’s listing, rebounded 2.6 per cent.

GFH Financial, by far the most heavily traded Dubai stock by volume, surged 6.1 per cent after saying it had started talks with Saudi Arabian authorities to cross-list its shares in Riyadh.

Meanwhile, rising tensions between Saudi Arabia and Iran over instability in Lebanon and the conflict in Yemen have increasingly worried investors.

Saudi Arabia’s index rose 0.7 per cent to close at 6,822 points in a broad-based rebound as gainers outnumbered decliners by 140 to 41. The petrochemical investor Alujain jumped its 10 per cent daily limit in heavy trade.

Abu Dhabi’s index fell 0.9 per cent to 4,274 points as the telecommunications blue chip Etisalat retreated 1.2 per cent.

The Egypt index increased 0.8 per cent to 13,839 points, while Kuwait edged down 0.04 percent to 6,229 points.

In Bahrain the index gained 0.4 percent to 1,269 points and Oman’s index edged up 0.02 percent to 5,078 points.

World shares scaled yet another record high yesterday, propelled by a bullish growth and company earnings outlook, as well as investors’ unflagging enthusiasm for technology stocks.

Wall Street looked set for another upbeat session, with Dow Jones stock futures trading slightly higher.

And with oil prices at a two and a half year high – US crude rose to US$58.05 a barrel, before easing to $57.78, up 95 cents yesterday afternoon and Brent crude, the global benchmark, was up 57 cents at $63.14 – adding to tech-driven bullishness, world stocks have taken just nine days to surpass their previous record peak.