UAE investors prefer to stick with caution for now
UAE markets have declined on account of rising risk version across global markets.
And yet, the National Commercial Bank’s $15.6 billion acquisition of Samba Bank is a positive for GCC markets as whole. The acquisition will be done by issuing shares of NCB to Samba Bank shareholders, and the combined bank will have assets worth $210 billion, making it the third largest in the region.
The mergers and acquisitions scene in the GCC is strong even in the midst of the pandemic, and this is huge takeaway for regional financial markets as larger consolidated players will be able to enjoy economies of scale.
Recently, Abu Dhabi National Oil Company raised $10 billion by selling a stake in its natural gas pipelines to a consortium of international fund heavyweights. Oman recently witnessed $ 1billion plus deals, whereby Chinese companies took a stake in its electricity companies.
The spate of deals show the maturing of economies as well pragmatism of policymakers. This openness should be supportive for financial markets, long-term.
Resumption of connections
The broad trend of economies reopening across the world should continue and governments are unlikely to go back into a complete lockdown. India’s Directorate-General of Civil Aviation (DGCA) has said that international flights will be allowed on a case-to-case basis, in a sign of gradual reopening of aviation markets.
UAE also has said that it will be allowing flights to the country after some conditions are met. This can help airline shares rally in the near term as they seem to have already discounted the worst. It must not be forgotten that Europe and China seem to be past the worst of the pandemic.
On DFM, the shares of mineral water company Gulfa rallied by 14.90 per cent as its rights issue of Dh10 million got completed. The company’s fundamentals may seem not attractive enough, having posted losses as well as revenue declines for three consecutive years.
On ADX, energy major Taqa was a big loser as it posted a loss of Dh1.7 billion for the first quarter on account of impairment charges, while revenues declined to Dh4 billion. The shares of Taqa are likely to be subdued as energy prices remain under a cloud of uncertainty.
NMDC (National Marine Dredging Company) shares, which had strong run after the company announced Dh62.5 million dividend, was unchanged today. DFM and ADX has support near 2,000 and 4,240 respectively.
- Vijay Valecha is Chief Investment Officer at Century Financial.