03/05/2016 06:11 AST
Equity markets in the United Arab Emirates extended declines on speculation recent gains were overdone after earnings fell at some of the country’s biggest banks.
Abu Dhabi’s ADX General Index slipped for a second day, dropping 0.8 per cent to 4,506.14 at the close, the lowest level in more than two weeks. First Gulf Bank PJSC, the emirate’s third-largest lender by assets, was the biggest contributor to the gauge’s retreat after last week reporting a 6 per cent decline in first-quarter profit. Abu Dhabi Commercial Bank PJSC, which said on Wednesday its profit fell 18 per cent, slipped a second day. Dubai’s DFM General Index lost 1.3 per cent.
Most publicly-traded banks in Abu Dhabi posted declines in first-quarter profits as the fallout from low oil prices continues to weigh on earnings. The financial results served as a reminder to investors that while crude, the main source of income for the six-nation Gulf Cooperation Council, has rebounded from a 2003-low in January, it remains 50 per cent below its level two years ago. Rising oil prices helped push stock gauges in UAE, Qatar and Saudi Arabia into bull markets.
“The UAE markets have been on a steady rally from its low back in mid-January, primarily on speculation,” said Ahmed Shehada, the executive director of advisory and institutions at NBAD Securities LLC. “With the volatility in oil and first-quarter results, it’s no surprise that the market is starting to lose steam.” UAE. shares are no longer considered cheap, he said.
Abu Dhabi shares traded at almost 12-times future earnings on Thursday, the most since December 2014. Companies on Dubai’s gauge were last week trading at about 10-times expected earnings, near the highest in four months.
UAE Volumes
First Gulf Bank slid 1.5 per cent, the most in a month, and Abu Dhabi Commercial Bank dropped 2.3 per cent. Union National Bank PJSC fell 0.6 per cent after reporting a 27 per cent decline in first-quarter profit on Thursday.
Trading volumes were depressed, with about 184 million shares changing hands on the DFM General Index, 58 per cent below the 20-day average. Trading on Abu Dhabi’s main gauge was less than half the average.
Qatar’s QE Index closed little changed. Aamal Co climbed 4.4 per cent after posting a 25 per cent jump in first-quarter earnings. Qatar National Bank SAQ, which last week tapped the debt market and raised $1.1 billion, slipped 0.4 per cent.
Kuwait’s SE Price Index rose 0.2 per cent and Oman’s MSM 30 Index added 0.1 per cent. Markets in Bahrain and Egypt were closed for public holidays.
Saudi Maaden
Saudi Arabia’s Tadawul All Share Index lost 0.8 per cent, even as Saudi Arabian Mining Co surged 9.9 per cent, the most in five years. Investors are speculating the company known as Maaden will become more profitable as the kingdom seeks to diversify its economy away from oil. The Saudi Public Investment Fund replaced its representatives on the board and named Aramco’s Khalid Al-Falih as chairman.
“Mining and minerals was one of the industries mentioned in the Vision 2030 as a sector that the government is going to invest in,” said Mohammed Alsuwayed, the Riyadh-based head of capital and money markets at Adeem Capital. “Khalid Al-Falih is a member of the Public Investment Fund board, and so that means they’re probably going to restructure the company to make it more profitable.”
The investment fund is a key part of Saudi Arabia’s blueprint for the post-oil era, which Deputy Crown Prince Mohammed bin Salman announced last week.
Oman Daily Observer
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