Abu Dhabi shares rallied to a 19- month high on bets earnings of the emirate’s banks will improve and as the measure’s equities offer cheaper valuations than Persian Gulf and emerging-market peers.
National Bank of Abu Dhabi PJSC, which may post an 11 percent advance in 2012 profit, rallied to the highest level in almost seven years. Union National Bank (UNB) PJSC, whose shareholders include the governments of Abu Dhabi and Dubai, gained for a second day. The ADX General Index (ADSMI) increased 0.5 percent to 2,741.83, the strongest level since June 2011, at the close in the United Arab Emirates capital.
The index has gained 19.6 percent since a Jan. 17, 2012 closing low of 2,293.09, nearing the 20 percent threshold some investors consider as the beginning of a bull market. Abu Dhabi banks and real estate companies are recovering from a credit crisis that caused property prices in the U.A.E. to drop by as much as 65 percent and slowed lending, bringing the neighboring emirate of Dubai to the brink of default in 2009.
“The fundamentals support the rise as corporate profits are growing while the valuation is still depressed compared with regional stock markets,” said Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities. The rally will continue “within the limits of the technical picture.”
The measure climbed 9.5 percent in 2012 after dropping the previous two years. Abu Dhabi stocks trade at a price-to-book ratio of 1.01 times, compared with 1.6 times for the Bloomberg GCC 200 Index (BGCC200) and 1.7 times for MSCI Emerging Markets Index. (MXEF)
Bank Earnings
National Bank of Abu Dhabi, the U.A.E.’s second-biggest bank by assets, may post profit of 4.1 billion dirhams ($1.1 billion) versus 3.71 billion dirhams in 2011 when the lender releases results on Jan. 31, according to the average estimate of eight analysts on Bloomberg. The shares, which surged 27 percent last year, increased 3.6 percent to 11.45 dirhams.
Union National Bank’s fourth-quarter net income may more than double to 300 million dirhams, the median estimate of three analysts on Bloomberg shows. The shares rose 0.9 percent to 3.32 dirhams, the highest level since September 2011.
Real estate shares in the emirate helped lead the benchmark’s 2012 gain as the government said it would resume stalled projects including branches of the Louvre and Guggenheim museums and as Aldar Properties PJSC (ALDAR) and Sorouh Real Estate Co. (SOROUH) negotiated a potential merger. Shares of the two Abu Dhabi developers dropped 0.6 percent today after rallying more than 15 percent last week.
Qatar Drops
The ADX General Index’s 14-day relative strength index rose to 74 today. A reading above 70 indicates to some investors that a security is poised to decline. About 143 million shares were traded, exceeding the 12-month daily average of 69 million shares.
Elsewhere in the Gulf Cooperation Council, Bahrain’s measure gained 1 percent and Oman’s MSM30 Index (MSM30) climbed 0.4 percent. Kuwait’s gauge rose 0.7 percent. The Bloomberg GCC 200 Index of the biggest companies in the GCC decreased 0.7 percent as Qatar’s QE Index (DSM) lost 1.1 percent and Saudi Arabia’s Tadawul All Share Index (SASEIDX) fell 0.7 percent, snapping a four-day rally. Dubai’s DFM General Index (DFMGI) slumped 1.3 percent after surging 4.4 percent last week. In North Africa, Egypt’s EGX 30 Index decreased 0.9 percent.
Israel’s TA-25 Index (TA-25) retreated 0.5 percent at 3:39 p.m. in Tel Aviv. The yield on the benchmark 5.5 percent bonds due 2022 fell one basis point, or 0.01 percentage point, to 3.77 percent.
Bloomberg
