UAE bourse treads water in troubled times

The UAE stock market was closed for most of last week on the occasion of Eid Al Adha, but traders felt that not much business would have been done if they had been open.

For the usual inertia of Gulf markets facing a crisis, the rabbit caught in a headlight syndrome, is now in play. On Saturday, when the UAE bourse re-opened, the Emnex lost 3.76 points to 2,215.52 on a total turnover of 121,943 shares worth a paltry $1.85m.

Yet excellent results from the National Bank of Dubai and an extraordinarily high cash dividend of 40% are a reminder that corporate profits are on an upswing in the UAE. This is not like the US, UK, Europe or Japan, where company profits are taking a hammering.

Absolutely the reverse phenomenon is happening. Emaar Properties recent financial results demonstrated this admirably and its new ratios are very impressive.

As K. Raveendran points out in his Gulf News column this week, Emaar shares stand at Dhs22.60 today against Dhs24.60 two years ago. However, earnings per share is up from Dhs1.15 to 2.03, return on equity from 1.7% to 9%, return on assets from 1.7% to 7.8% and dividend yield from 2.8% to 4.4%.

Now when you consider that low US interest rates (which determine UAE interest rates) are likely to persist for some considerable time, fuelling real estate purchases, the reality of this depressed share price is only too obvious.

However, with oil revenues for the UAE this year likely to match the 20-year high of 2000 much the same could be said of all the other listed companies in the country. Expect a sharp rally in share prices as soon as investors take their eyes off CNN.