The shares on the Abu Dhabi markets have climbed to a five-month high while investors wait for Q3 earnings to surface. It is forecasted that these earnings will result in a trading boost. Two years have passed since the global economic crisis and evidence of a lasting recovery is being watched for.
The signs are encouraging. Settlements have been reached between Dubai World and nearly all of its creditors, the local bourses are moving up and evidence of a revival in the capital market is showing up. The Managing Director at EFG-Hermes Brokerage out of Dubai, Alfred Fayek, stated that optimism is widespread and most bank stocks are on the rise. Clarity is reigning and no more provisions are needed in the banking sector.
The debt markets are also showing signs of recovery as a number of new sukuks were announced in Abu Dhabi at the International Islamic Finance Forum. For instance, a sukuk implemented by Saudi Aramco and Total for the financing needs of an oil refinery project in Jubail was announced. Credit Agricole’s global head of Islamic banking, Simon Eedle, stated that the Dh 3.67 billion (US $1 billion) sukuk will be launched by the close of 2010.
These announcements were made on the tails of other recent major offerings throughout the GCC region, such as Aluminium Bahrain, Nawras, the mobile phone business out of Oman and the cell phone retailer Axiom Telecom of Dubai.
Certain analysts still expect that the Q3 earnings will be affected by the crisis, despite these positive developments, according to the VP and chief trader at Dubai’s Gulfmena Alternative Investments, Marwan Shurrab. They expect to see strong profits emerging in Q4 and the opening months of next year. It is forecasted that local banking establishments will announce increased profits due to the heavy provisioning that took place in the first two quarters of this year.
The largest profit growth is expected to come from Abu Dhabi Commercial Bank, where analysts agree a Dh 258.7 million Q3 net income is likely, a significant hike from the Dh 35 million reported over that same time period in 2009. Developers are expected to report increases as key projects were handed over throughout the third quarter, resulting in long waited for benefits. Analyst for Dubai’s Nomura Securities Chet Riley noted that revenue is recognized when the delivery schedule is met.
Nomura’s figures for the hand over rate at Buri Khalifa of Emaar Properties land at 30 per cent, with the rate for Aldar Properties coming in at 8 per cent due to the recent launch of the Al Bandar project. Analysts agree that Emaar should report a net profit of Dh 699.2 million for the third quarter, up from Dh 655 million in 2009’s Q3. Although Aldar Properties is forecasted to show a Dh 230.9 million loss compared to the Dh 427 million profit shown in the third quarter of last year, that figure is an improvement over the second quarter loss of Dh 475 million.
Operational losses are still expected to appear, said Riley. It is felt that a clear, consistent plan for credible financing during the fourth quarter will be the catalyst investors are looking for. Four analysts state that Etisalat’s third quarter earnings are expected to decrease slightly, coming in at Dh 2 billion from the Dh 2.2 billion reported in the third quarter of 2009. Etisalat has a bid to acquire telecoms operator Zain, but the deal to take control of 46 per cent of the Kuwaiti company will have no effect on earnings.
After an extended time of low trading volumes and falling share prices, this optimistic news and improvements will draw investors back into the local bourses. In Dubai, the Financial Market General Index has gained by over 15 per cent since the beginning of September, giving it the best performance in any regional index for this quarter. The Securities Exchange General Index in Abu Dhabi has rallied over 7 per cent in that same time period.Paul Holdsworth, Staff Writer, Gulf Jobs Market News