Dubai’s bourse remains volatile as heavyweight Emaar Properties swings between positive and negative territory and trading focuses on Arabtec, which falls further.
Dubai’s index is up 0.2 per cent after gaining as much as 1.8 per cent earlier in the session. Emaar edges up 0.1 per cent to Dhs9.50, but trading volumes in the stock tend to be higher on downward moves; it has retreated from an intra-day peak of Dhs9.74.
Smaller developers Union Properties and Deyaar Development add 1.9 and 1.7 per cent respectively.
Shares in Arabtec slide 1.9 per cent and dominate trading volumes. The company, whose stock fell 24 per cent in the previous three sessions, sought to calm investors on Wednesday, saying its finances remained strong and ambitious expansion plans were still in place. Many fund managers, however, think speculation drove it up to unsustainable levels.
Abu Dhabi’s bourse edges up 0.2 per cent on the back of First Gulf Bank.
Qatar’s index slides 0.4 per cent as Industries Qatar and Masraf Al Rayan fall 0.9 per cent each.
Nomura Asset Management Middle East says in a report released on Wednesday that valuations of stocks in the Gulf Cooperation Council are running ahead of expected growth in corporate profits; it estimates the price/earnings ratio of nearly 18 times for the MSCI GCC index is a 74 per cent premium to the MSCI BRIC index and 40 per cent above the MSCI Asia index.
The quality of profits in GCC fims has improved as they have focused on their underlying operations, but there has been no improvement in profit margins, return on assets or return on equity since the financial crisis, Nomura says.
“Multiple expansion could yet drive prices higher but with levels already elevated and in the absence of an acceleration in profit growth the upside for many GCC stocks appears to be capped,” it says, warning that an uncertain global environment and ballooning liquidity meant the risks for Gulf markets are considerable.
“Alas the spectre of a stock market driven increasingly by liquidity rather than reasonable valuations raises uncomfortable parallels with the risk-taking activity observed across the region a few years ago.”