No takers for UAE stocks even among bargain buys

SLUGGISHNESS PERSISTS WITH THE ONLY SILVER LINING BEING ADX’S OUTPERFORMANCE

UAE equity market traders, who have seen a sustained underperformance in the local indices, are still indifferent to beatendown stocks. This is despite a recovery in the earnings of some of the heavyweight real estate companies.

The value of Emaar Properties’ shares have fallen 41 per cent from the high of Dh8.22 in September 2017, despite better than expected growth in earnings. Emaar Malls’ shares have been on the fall since their listing, when the share price was at Dh3.50, meaning a 44 per cent decline since 2014.

Damac shares have dropped 53 per cent since July 2017. Dubai Investments has tripped from a high of Dh2.66 seen in October 2017, thus registering a 47 per cent decline.

“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,” said Nishit Lakhotia, head of research at SICO based in Bahrain. “This has further dampened sentiments and has a major influence on the index.”

Earnings of real estate companies have held up reasonably well in what has been an exceptionally tight third quarter.

Emaar Properties posted a fairly healthy rise for the three months to September, while Union Properties recovered from a massive decline during the third quarter last year.

But market participants are not buying that argument.

Doubts over supply

“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, 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 in January 2017, down 27 per cent. The Dubai index has been trading in a tight range of 2,700-2,850 over the last 15 weeks, with an average traded volume of 500 million shares.

The only silver lining has been the outperformance in the Abu Dhabi index, which 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.