Emaar Malls IPO rush weighs on Dubai stocks

17/09/2014 00:38 AST

A rush by Dubai’s retail investors to take part in the initial public offer of Emaar Properties’ malls unit put pressure on the emirate’s stock market yesterday, while successful fund-raising for the Suez Canal expansion lifted stocks in Egypt.

Emaar said late on Monday that institutional investors had committed to buying all the shares offered to them in the flotation of its shopping malls business, only a day after the IPO was launched.

Dubai’s largest property developer plans to raise as much as 5.8bn dirhams ($1.58bn) from the offer of a 15% stake in Emaar Malls Group (EMG), which is expected to be the Gulf’s biggest stock sale since 2008.

Emaar aims to sell about 30% of the offered shares to retail investors in a separate tranche, and Monday’s announcement appeared to have prompted them to submit more purchase applications, leading them to cash out of other stocks to raise money.

Emaar has said it will allocate shares on a pro rata basis in case of oversubscription.

Dubai’s index fell 0.7% while shares in Emaar itself slid 1.8%. Retail investors were net sellers of stocks, according to bourse data.

“It’s a big IPO so some investors have to manage their allocations and may have to offload some parent company shares,” said Harshjit Oza, property and banking analyst at Naeem brokerage in Cairo. “The stock has been very volatile and I think you’re going to see this volatility until EMG gets listed.”

The offer closes on September 24 for retail investors and on September 26 for institutional investors, with EMG shares then listing on the Dubai Financial Market on October 2.

Abu Dhabi’s bourse slipped 0.1% because of banks. Union National Bank fell 2.6%, Abu Dhabi Commercial Bank edged down 0.9% and National Bank of Umm Al Qaiwain tumbled 7.4%.

Saudi Arabia’s index rebounded after a few days of profit-taking and rose 0.6%. Food maker Savola Group was the main support, rising 2.1% after the company said it had picked JP Morgan to advise on its potential purchase of a stake in Kuwait Food Co.

Egypt’s bourse was the best performer in the region, rising 0.9% after the country raised the $8.5bn it needs to fund a project to expand the Suez Canal in just eight days.

The money came from the sale of investment certificates backed by the central bank and the government.

“It shows that things are back on track and people have confidence in the economy,” said Naeem’s Oza.

Officials have said the expansion will boost annual revenues from the Suez Canal, which is operated by the state-owned Suez Canal Authority, to $13.5bn by 2023 from $5bn currently.

Canal revenues are a vital source of hard currency for the country, which has suffered a slump in tourism and foreign investment since the 2011 uprising that toppled long-time ruler Hosni Mubarak.

Elsewhere in the Gulf, Kuwait’s index climbed 0.4% to 7,573 points; Oman’s measure edged up 0.2% to 7,488 points, while Bahrain’s index added 0.2% to 1,469 points.

Gulf Times