UAE markets are heavily skewed toward property stocks and domestic real estate remains mired in a deep correction as over-supply and a lack of demand weigh on prices.
Earnings at banks, the other main sector on UAE bourses, were closely tied to those of property, with lenders financing Dubai’s building boom, but banks will make a faster recovery, Reuters said.
“In terms of bank revenues, there should be some quarter-on-quarter improvement,” Reuters quoted Shabbir Malik, EFG-Hermes bank analyst, as saying. “There’s more liquidity in the system and that will help the cost of funding. The main impact on profits, however, should come from lower provisions compared to Q4.”
UAE bank loan growth was 1 percent in January and 0.6 percent in February, Malik said.
“The trend isn’t bad and banks’ management have indicated they should achieve loan growth of 5 to 10 percent this year,” said Malik. “Loan growth should be driven by government spending — contractors and businesses that are working on government projects are expected to borrow from banks.”
With banks providing more clarity on their asset quality, discount rates should also fall.
“The main unknowns were Dubai World and Dubai Holding. Dubai World is now resolved, while Dubai Holding is coming out,” Malik added.
Saudi Arabia’s Tadawul All-Share Index (TASI) ended Wednesday at a six-week high, taking its March gains to 10.4 percent, with early-month panic selling forgotten as traders bet high crude prices would boost petrochemicals earnings in the world’s top oil exporter. The index closed 0.67 percent higher at 6,562.85 points. The sector activity for the day was mixed positive with 9 out of 15 with gains ranging from 0.05 percent by the Agriculture & Food Industries sector to 2.06 percent by the Telecommunication & Information Technology sector. On the other hand the losing sectors ranged from 0.02 percent by the Cement sector to 4.84 percent by the Transport sector. The overall market breadth for the day was positive with 62 advancers against 59 decliners giving it an AD ratio of 1.05, the Financial Transaction House (FTH) — licensed by the Capital Market Authority — said in its daily market commentary.
The stock market reached SR4.73 billion on Wednesday.
Speculators also hope the Kingdom’s plan to build 500,000 new homes will translate into a real estate boom, with the market increasingly expecting Saudi Arabia’s mortgage law — some 10 years in the making — will soon be approved, Reuters said.
“When people are encouraged to spend money in the housing market, they will borrow money from banks, but this will only show in Q2 earnings,” said Youssef Kassantini, a Saudi-based financial analyst.
Saudi’s index will correct next week, Kassantini said, but will then rally again, with insurance stocks to prosper.
“If you have more projects, there will be more insurance contracts,” added Kassantini. “Material providers like SABIC and Arabian Pipes will also benefit.”
An Egyptian market rally is expected to stall next week as stocks consolidate recent gains, but retail investors are returning, having been battered by this year’s stock plunge.
Cairo’s main index has gained 10.7 percent since March 24’s 23-month low, ending Wednesday at 5,481 points, with trading resuming last week following an eight-week suspension, Reuters said.
Orascom Telecom has gained 13.7 percent this week. The firm said it would hold a shareholder meeting on April 14 to approve a split of the company and a capital increase.
