IPOs in the Emirates steer an escalating trend

IPOs in the Emirates steer an escalating trend

Adam Bouyamourn

September 14, 2014

Updated: September 14, 2014 04:00 AM

 

Hisham Khairy, the head of institutional trading at Menacorp, says the momentum is there for UAE markets to head higher, with a lot of investors gearing up for the initial public offering of Emaar’s malls unit.

What is the asset class and geography you are focused on?

Menacorp’s main focus would be trading regional equity markets for our institutional clients, with a special focus on the UAE.

What is the outlook for the month ahead? 

Some markets are offering really good opportunities. Let’s focus on UAE, where fundamentals are looking strong, and companies are reporting better than expected numbers. The country has a healthy economy, where some companies are even paying their debt early such as Nakheel [or Dubai World]. The country’s equity market was the best performer last year, and is again this year, year-to-date.

Real estate prices have risen sharply since Dubai’s Expo win, and now have settled, but are due for a correction, which could generate more inflows into equities and additional inflows from neighbouring countries because of the political unrest. The markets had a strong correction sparked by Arabtec’s dilemma, and have since been on the rise. IPOs are being announced: Marka was the first, then Dubai Malls, with more to come towards the end of the year. A lot of investors have been on the sidelines due to the summer and Ramadan, and are now looking to come back to the markets. All these factors point to a market heading higher for the medium to long term.

What are the main risks, either upside or downside, to the outlook?

Momentum is there for UAE markets to continue heading higher. The main downside risk would be external: either geopolitical risk, or a global event that will spill over into the Arabian Gulf. Global markets are printing lifetime highs with no real, fundamental story to back their performance up, while growth and inflation numbers give reasons for pessimism.

What is the best investment at the moment?

In the UAE, I would say MSCI names, with a special focus on Emaar. The stock will definitely benefit from an oversubscription in the Dubai Mall IPO, and a lot of investors will be willing to put money into the Emaar stock instead of subscribing, due to weak allocations expected. The minor correction we had in the last few sessions was a great buying opportunity, and we expect the stock to continue outperforming the market for the time being.

What was the best investment you were ever involved in? 

Buying Aldar back in 2007 when it opened for foreign ownership was probably my best investment. Then, the stock was trading at Dh3.82 and after the announcement it had a very strong rally up to Dh7.50 in two months, which resulted in almost a 100 per cent profit.

What was the worst? 

Arabtec’s momentum was pretty strong when it moved from around Dh3.45 to Dh7.74. Then the stock started to correct. My worst piece of advice was to buy it at around Dh4.50. This turned out to be really bad and the stock continued its freefall to Dh2.35, losing almost 50 per cent in a matter of two weeks. They say never catch a falling knife, but sometimes you get lucky.

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