Risk aversion keeps investors away from DFM - Emirates24|7

Risk aversion keeps investors away from DFM

The Dubai bourse failed to advance on Monday's gain, as it closed 1.35 per cent down yesterday pulled by the real estate and insurance counter.

"It seems investors have adopted a risk aversion policy and so we are not seeing much activity on the bourse," Ganesh Mani, research analyst with Waves Investments, told Emirates Business.

Emaar Properties, which had gained 1.72 per cent on Monday, fell 1.69 per cent to finish at Dh11.60. It rose to an intraday high of Dh11.90. More than 14.7 million shares worth Dh172 million were traded in 476 deals.

"The scrip seems to have lost its charm. Emaar has been doing well in Saudi, but it needs to do well locally too," Mani said.

According to the company's first-quarter earnings results, it sold Dh1.84 billion of apartments in the three months to March 31, as costs declined 11.3 per cent.

EFG-Hermes said on Monday it has maintained its short-term "accumulate" and long-term "buy" ratings on Emaar and said the firm was well on track to achieve its target of 10 to 15 per cent of revenue growth by 2010.

Shares of Tamweel declined 1.28 per cent to Dh7.68, as more than 8.4 million shares worth Dh65m changed hands in 402 deals. The company has received regulatory approval to end the lock-up period for its founding members, who have the right to sell their shares in the market. Amlak Finance lost 0.81 per cent to close at Dh2.44, with 15.2 million shares worth Dh74.3m being exchanged.

Air Arabia shares fell for the third day in row, as the scrip closed 1.47 per cent lower at Dh2. More than 47 million shares of Dh94m were traded.

Shuaa Capital on Monday said the "burgeoning competition and cost inflation may have started to erode Air Arabia's first mover advantage in the region, partially reflected by lower margins".

"However, given the seasonality of the industry, the strong performance of new routes and the anticipated new aircraft deliveries, we are expecting stronger performance in the forthcoming quarters of the year. Increasing fuel costs and other inflationary pressures will remain the key risk to margins," the investment bank said.

Shares of Dubai Financial Market Company dropped two per cent to Dh5.86, while Tabreed lost 2.29 per cent to finish the day at Dh2.56.

Among the banking scrips, Commercial Bank of Dubai fell 0.46 per cent to Dh10.80, Emirates NBD declined 2.03 per cent to Dh12.05, while Dubai Islamic Bank lost 1.40 per cent to Dh9.10.

Overall, 388 million shares totalling Dh1.57 billion were exchanged in 7,990 deals, as 26 scrips declined and four advanced.

"The political situation in Lebanon, as any instability in the region, will naturally cause hesitation among investors. The low volumes show liquidity is waiting on the sidelines until investors get a better view of the situation," Rami Sidani, vice-president at Shuaa Capital told Bloomberg.

United Foods gained 3.63 per cent to Dh5.70, Dubai Islamic Insurance jumped 2.04 per cent to Dh37.40, while Gulf General Investments rose 0.51 per cent to end the day at Dh7.86.

The Abu Dhabi Securities Exchange (ADX) closed flat at 5,022.14 points, down 0.09 per cent. Aabar Investments rose 0.55 per cent to finish at Dh3.63, as 33 million shares were traded, while etisalat declined 0.47 per cent to Dh21.35, with 972,694 shares being traded. Sorouh jumped 0.41 per cent to Dh9.77, with 14.7 million shares being traded.

The gross margins improved to more than 66 per cent for the quarter and we believe this reflects Sorouh's pricing power in its domestic market. At current price, the stock offers approximately 25 per cent upside potential, according to an Al Mal Capital report.

Banking stocks such as Abu Dhabi Islamic Bank dipped by 0.46 per cent to Dh6.44, Union National Bank slipped 0.90 per cent to Dh8.80, while First Gulf Bank rose 0.22 per cent to Dh23.20.

The market saw a turnover of 227 million shares worth Dh1.25bn in 4,939 deals. Out of the 48 companies that traded, 17 declined and 25 advanced.

"The ADX will break the 5,000 range only when two or three scrips take an initiative. And it will mostly come from real estate, banking and telecom counters," Mani said.


Buy recommendation for Arabtec Holding

EFG Hermes has reiterated its buy recommendation for Arabtec Holding, listed on the Dubai market, with a fair value of Dh19.38 on the back of strong earnings growth momentum and attractive near-term multiples.

"We forecast 2008 earnings will grow by 78 per cent leading to attractive near term P/E multiples of 10.1x 2008e and 7.5x 2009e," it said in a note.

Arabtec closed flat at Dh16.10, with more than 1.4 million shares worth Dh22.69 million were traded. The company has made a wave of positive announcements this year, including a Dh10bn contract in St Petersburg in Russia. It is now just below its foreign ownership limit of 49 per cent, so the stock may struggle to make further headway in the near-term, although such a constraint has not been apparent in its 32 per cent hike over the past month.