Abu Dhabi’s two largest property developers lifted the emirate’s bourse on Monday as investors cheered the pair’s merger talks, while Egypt’s Palm Hills (PHDC.CA) dragged down the market after reporting lower revenue.
Aldar Properties ALDR.AD and Sorouh Real Estate SOR.AD surged 9.8 percent each. The two firms said late on Sunday they were looking at a state-backed merger and a decision was expected within three months.
“Aldar holds a very high amount of debt on its balance sheet as opposed to Sorouh, which has lower leverage and a better cash flow visibility,” said Ali Adou, portfolio manager at The National Investor. “So the solution might be to merge both entities and dilute the debt.”
Aldar and Sorouh were up 45.7 and 55.8 percent respectively in 2012, both rebounding from all-time lows in mid-January.
Investors however, are cautious of the long-term benefit amid a struggling real estate sector.
“In the long run, I think it will have little impact — this doesn’t make me a long-term buyer in either Sorouh or Aldar,” said Robert McKinnon, ASAS Capital chief investment officer.
Abu Dhabi’s benchmark .ADI advanced 1.1 percent in its third straight gain, resuming a near two-month rally.
Palm Hills tumbled 9.8 percent.
“Palm Hills results were bad and it had a bad effect on the bourse along with other real estate stocks like TMG,” said Hisham Metwalli, trader at Arab Finance brokerage.
Palm Hills suffered from last year’s uprising that toppled President Hosni Mubarak and is one of several real estate firms that faced legal challenges to land deals with the state.
Dubai’s index fell 1.1 percent, halting a two-day rebound after last week’s drop. The market had a strong bull run for the last two-months, up 23.2 percent in 2012.
National Central Cooling TABR.DU tumbled 9.5 percent, Dubai Investments DINV.DU shed 5.2 percent and bellwether Emaar Properties EMAR.DU slipped 0.3 percent.
In Saudi Arabia, the index .TASI edged higher 0.08 percent, hitting a fresh 41-month closing high. The market traded 16 billion riyals ($4.27 billion), the largest turnover since February 28’s 16.1 billion riyals, which was a four-year high.
Small-caps, real estate and insurance stocks dominated volumes. Dar Al Arkan 4300.SE gained 4 percent and Emaar Economic City 4220.SE jumped 7.7 percent, together accounting for about a quarter of all shares traded.
“What’s happening now is speculators are trading stocks with prices close to 10 riyals but it’s nothing fundamental,” said Hesham Abo-Jamee, chief executive officer at Bakheet Investment Group. “These stocks are cheap by value, but not by valuations.”
The insurance index .SINSI slipped 0.3 percent.
In Qatar, the index .QSI eased 0.03 percent in slow trade as investors shifted focus to better performing Gulf markets.
“Liquidity is always looking for a better return on investment – this is why we are seeing a shift to the UAE,” said Firass Yaish, business development manager at ICM Capital.
“The Saudi market is also very promising in terms of return on investment, but access is still limited.”
In Oman, the index .MSI climbed 0.3 percent to a fresh seven-month high.
* The index .ADI gained 1.1 percent to 2,615 points.
* The measure .EGX30 fell 1.5 percent to 5,223 points.
* The index .DFMGI slipped 1.1 percent to 1,667 points.
* The index .TASI inched up 0.08 percent to 7,540 points.
* The index .MSI gained 0.3 percent to 5,902 points.
* The benchmark .QSI eased 0.03 percent to 8,634 points.
* The measure .KWSE eased 0.07 percent to 6,150 points.
* The measure .BAX eased 0.03 percent to 1,150 points.