Dubai bull run continues after successful Emirates REIT listing

09/04/2014 07:19 AST

Dubai’s main stock market posted its biggest gain in three weeks yesterday as real estate investment trust Emirates REIT listed on the smaller of the two markets, NASDAQ Dubai, following the emirate’s first initial public offer in five years.

Shares in Emirates REIT closed at $1.44, up 5.9% from the IPO price, with 21.4mn shares changing hands out of a total of 128.68mn sold in the $175mn offer, which was 3.5 times oversubscribed.

“I think it was a very good start,” said Sebastien Henin, head of asset management at The National Investor. “The company listed on NASDAQ Dubai and usually investors don’t really like that.”

Dubai’s equity trading is heavily concentrated on the main exchange, Dubai Financial Market (DFM), but that market requires IPOs to offer at least 55% of a company, which discourages some potential issuers. NASDAQ Dubai has looser requirements but less liquidity and fewer listed stocks.

Emirates REIT’s IPO price was roughly equal to its book value, which Henin said was “a perfect approach” to valuation.

“We should expect the price of the stock to be aligned with the net asset value,” he said. “The stock price shouldn’t be too volatile and its risk profile will be very different from that of developers. The successful listing buoyed sentiment on the DFM, where the index added 1.9% to 4,743 points. Lender Emirates NBD contributed most to the move, jumping 6.8% to Dh9.60, its highest level since September 2008.

“Emirates NBD has been doing well recently and for a number of reasons,” said Amer Khan, a senior executive officer at Shuaa Asset Management.

In addition to offering investors a way to bet on Dubai’s booming economy and having an attractive valuation compared to other UAE banks, Emirates NBD may also post large one-off gains if it reclassifies its large exposure to the Dubai World conglomerate as performing loans; an ENBD executive told Reuters on Monday that might happen this year.

Some fund managers expect ENBD eventually to relax the tight 5% cap on foreign ownership in its shares, as other local companies have been doing.

A few other property firms and banks also gained yesterday. Shares in contractor Arabtec rose 6.1%.

Shares in bourse operator DFM added 3.9% after a top Dubai economic policymaker said on Monday an agreement to merge it with the Abu Dhabi Securities Exchange had been reached in principle, though nothing had been finalised.

Gulf Times