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03 June 2023

Mixed day for blue chips brings minor gains to ADX

By Matt Smith

The Abu Dhabi Securities Exchange made minor gains on a mixed day for the capital's blue chips.

The ADX edged up 0.35 per cent – or eight points – to 2,196, despite declines in its telecoms and property sectors.

As this column warned yesterday, Sunday's surge by Abu Dhabi's realty stocks was misleading because the index's use of average pricing masked their late slump.

This saw Aldar Properties and Sorouh Real Estate open down yesterday and they never recovered, with the latter falling 4.1 per cent to Dh2.56 and the former dropping 5.2 per cent to Dh2.33, which is a new two-year low.

Etisalat struggled, falling 0.8 per cent, but it can expect some bounce today after enjoying a late rally.

The capital's lenders performed stoutly, with Abu Dhabi Commercial Bank and National Bank of Abu Dhabi surging 5.8 per cent and nine per cent respectively, while First Gulf Bank was unchanged.

"This shows the Central Bank's tough new requirements for UAE lenders has been well received by investors," said Wadah Al Taha, a financial analyst.

On Sunday, the UAE Central Bank said it would examine the true quality of assets on banks' balance sheets. Banks will now have to receive Central Bank approval before they can publish their accounts.

"Banks propped up the ADX yesterday, with more optimism surrounding their full-year results – the fourth quarter is likely to be bad, but they did pretty well in the first half of last year," said Taha.

"Until six months ago, it would take usually three consecutive days of gains to confirm the start of a rally, but now we have to wait longer before we can call a rebound."

Abu Dhabi's turnover eclipsed Dubai's for the first time in over a week and for only the seventh session since the start of October. ADX trading was worth Dh115 million yesterday. "The low volumes are a reflection that there are hardly any big players in the market and those that are active are making only small moves," said Taha.

This view is borne out by the statistics, which show yesterday's average trade was worth just Dh81,081, which is less than half the 2008 daily average of Dh205,975.

Aldar again dominated the action after seeing Dh34m of shares change hands.

Commercial Bank International was second with Dh19m, followed by FGB with Dh16m. Bank of Sharjah and Sorouh were next, with both claiming trading worth more than Dh10m.

In contrast to Dubai, which saw all its top five traders improve, CBI was the only one of the ADX's five most active stocks to end in the green, which suggests Abu Dhabi is the weaker of the two markets.

Tempting time

Stabilising markets should tempt long-term investors to return to UAE stocks, according to Wadah Al Taha, a financial analyst.

"For those with an investment horizon of 18 to 24 months, some short-term volatility will not be a deterrent, with many stocks at very attractive prices," said Taha.

"Some long-term players should return once the fourth-quarter results are out of the way, although others will wait for the Q1 numbers to provide a clearer outlook before taking positions."