Emaar and NBD to lead rally

A reversal of fortune for heavyweights Emaar and Emirates-NBD will lead an expected 10 per cent rally on the Dubai Financial Market at the end of June, according to investment bank Rasmala. Mediocre performance from both firms is to blame for adding to DFM's woes during May, which saw an overall loss of around one per cent, Rasmala's Middle East Market Overview said. Khaled Masri, the report's author and Partner at Rasmala, told Emirates Business that large caps like Emaar and Emirates-NBD would now be the catalyst for a turnaround in June fuelled by attractive first quarter results and a settling of global property markets. "We see the rally in Dubai happening towards the end of June as people start expecting confirmed results in the middle of July. An educated guess would be a good source of activity towards the last 10 days of the month and into July, leading to a five to 10 per cent increase. "Emaar and other large caps are not expensive at these levels so it's possible to see large moves there. Emaar as well as Emirates-NBD have been lagging but I expect a lift at the end of June, particularly as Emirates-NBD is showing a very strong trajectory in its first quarter results. As the merger settles down we see the bank as one of the dominant players in the UAE and outside," said Masri. He expects the Abu Dhabi Securities Exchange (ADX), which gained just one per cent in May, to achieve up to 15 per cent in the late-June rally, and overall the UAE to witness a 10 per cent move from current levels. Abu Dhabi favourite "We are favouring Abu Dhabi a little over Dubai in the coming month, in particular banking and property stocks in the capitol. Over the next few month it's quite possible to have a 10 to 15 per cent move upwards in the Abu Dhabi markets based on the current valuations and where we see profits growth coming," he said. "Emaar will benefit when the international situation settles, with a quieting of the question marks around the US real estate sector and global markets in general. It's probably the most globalised stock and has been unfairly affected by some of the negatives international sentiment. Emaar will be the catalyst because it's a very solid company, dominant locally, has interesting operations abroad and these are very low level stock price. Rasmala's report said in May Arabtec supported the DFM as its five per cent gain took its year-to-date gain to 70 per cent, making it the best performing stock in the GCC real estate and construction sector. Arabtec reported that first- quarter 2008 profit had quadrupled to $70 million (Dh262.5) from the same period a year earlier. Rasmala said ADX gains of around one per cent were especially impressive as market heavyweight Etisalat lost ground over the month. Mixed market Strong performances by banking stocks National Bank of Abu Dhabi and First Gulf Bank, together with real estate stock Aldar, compensated for this, as did the Abu Dhabi cement sector (RAK Cement and Gulf Cement) which was boosted by news that a major export market, Oman, had lifted the price cap on cement by 13 per cent at the end of May, according to the report. "Further supporting the market was news early in the month from Abu Dhabi National Energy (Taqa) of a six-fold increase in profit, which gave other energy sector shares a boost, including Dana Gas. "Valuations in the UAE markets as a whole are quite attractive at below 14 times estimated 2008 earnings. We would expect that earnings releases during July will be the catalyst to energise the markets and move them higher," the report said. Overall it was found Mena equity markets were mixed during May, with a large disparity in performance among the region's bourses. "Market movements over the past month are further proof both of the lack of homogeneity across the region's markets and their non-correlation with global capital markets. The broad Mena market index was around four per cent lower for the month," said Masri. "This was due to weak performances in the large Saudi Arabian and Egyptian markets, which were the worst performing regional markets over the month, and masked good performances in Kuwait and some of the smaller markets such as Oman, Qatar, Jordan and Lebanon," he added. A three per cent monthly gain reaffirmed Oman as the strongest performer of all the mena equity markets so far in 2008, while Qatar's five per cent gain has cemented its place in the top three. The Egyptian market suffered several setbacks and ended the month down more than six per cent as the central bank continued to increase interest rates to fight the social effects of inflation, while the prices of several strategic food and industrial commodities rose sharply, threatening domestic demand and stability. Rumours of new taxes on stock market investments also weighed on the Egyptian market. Within the GCC economies, the debate over the currency peg to the US dollar intensified as the UAE reported that inflation in 2007 surged to over 14 per