Shares in the UAE’s major real estate sector are on a decline, with Arabtec up 14.85 percent and Damac gaining 8.25 percent.
The broader DFM is up 0.10 percent, while ADX closed 1.06 percent higher. The real estate sector has outperformed general indexes since its lows in March. As of the third week of March, DFM has gained 20 percent, while the DFM Real Estate Index has risen by a staggering 40 percent.
Over the same period, Damac increased by an astonishing 163 percent and Arabtec by 153 percent.
There are company—specific and macro-level factors behind the stellar outperformance of real estate stocks. Recently, Arabtec had a reshuffle of its top management – Walled Al Muhairi, who happens to be deputy CEO of Abu Dhabi sovereign wealth fund Mubadala, has been appointed Arabtec chairman, and the hope is that he will accelerate the restructuring process.
On the other hand, Damac shares were charged by rumours of a private stake in the company. Maple Invest, a front-line company of Damac, has indicated that it is exploring various acquisition opportunities, including that of Damac itself.
A takeover of Damac should not be a big deal for the organisers – and this is indeed the best time. If there is a takeover, it means that Sajwani will survive the worst for Damac.
At the macro level, using US interest rate policy is bullish on emerging markets. The US Federal Reserve has decided to keep interest rates at the lower limit until 2022.
This means that the Fed will not raise interest rates until inflation exceeds its target. And this could also lead to inflation overturning the target before the Fed acts. Thus, the dollar basically loses its comparative interest-rate differential advantage against currencies such as the euro, leading to a long-term decline.
As the dollar becomes cheaper, the UAE’s assets become more attractive to external investors. And real estate will be an obvious beneficiary – all these considerations could be the spur to the stock rally.
DFM operator pulls second-quarter profit
Dubai: Dubai Financial Market reported a 21 percent increase in second-quarter revenue to 78.9 million Dh, compared to 65.1 million Dh last year. Net profit reached 44.2 million Dh, an increase of 20 percent.
In the first half of the year, the stock exchange operator generated sales of 181 Dh.
Source: Sharjah News