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Global Investment House "Global": UAE Markets Performance - FY2011

Weak performing real estates shares weighed negatively on the UAE markets

UAE market activity slowed down during FY2011 reaching its lowest levels

Global Investment House "Global" - Kuwait - UAE stock markets continued theirbearish trend for the second year in a row, as the representative indicesreported decline in 2011.This retreat is attributed to low liquidity due toinvestors' risk averse attitude, volatile geopolitical situation in the regionand also due to the postponing on the decision related to UAE entry in MCIEmerging market indices. International factors such as Eurozone crisis,expected lower growth in emerging markets also added to the investors concernsas they stayed away from entering into meaningful positions in the markets.

In terms of market indices, Abu Dhabi SecuritiesExchange (ADX) General Index dropped by 11.7 percent YoY, ending the year 2011at 2,402.3 points, retreating back to the levels of 2009, which witnessed theseverity of the financial crisis. The highest point the index reached duringthe year was 2,775.4 points, on June 19, while it reached its lowest level onDecember 21, at 2,343.3 points. On QoQ basis, Abu Dhabi General Index reporteda fall of 5.2 percent in the fourth quarter, as it continued a series of sharpdeclines experienced since the third quarter, which caused to lose all thegains that had been earned during the second quarter of the year.

In the meantime, Dubai Financial Market ( DFM ) General Index reported the secondhighest decline among the GCC stock markets in 2011 with an annual decrease of17.0 percent, down to its lowest level since 2004, ending at 1,353.4 points.The highest point reached by the index during the year was 1,681.9 points, on April21, while the index reached its lowest level on December 27, closing at 1,319.4points. On QoQ basis, the index continued its downward journey, which startedduring the first quarter of the year and continued throughout the following three quarters, shedding 5.5 percent in 4Q2011 compared with the 3Q 2011 level.

Trading Activity
Trading activities slowed down in UAE markets during 2011, as the value of sharestraded reached its lowest level since 2004. In ADX, volume of shares tradeddecreased from 17.6bn in FY2010 to 16.5bn in FY2011, representing a decline of6.1 percent. Meanwhile, aggregate value of shares traded stood at AED25.6bn (USD7.0bn)in 2011 compared to AED34.1bn (USD9.3bn) in the previous year 2010, recording adecline of 24.9 percent. Similarly, trading activities in DFM was slower duringthe year 2011, as volume of shares traded declined by 34.5 percent, with 25.2bnshares traded compared with 38.4bn shares traded in FY2010. In the meantime,aggregate value of shares traded declined from AED69.7bn (USD19.0bn) in FY2010to AED32.1bn (USD8.7bn) in FY2011, recording a decline of 53.9 percent.

Notably,real estate sector continued to contribute the most in the total volume and value of sharestraded in the both markets during 2011. As the real estate companies' shareshave been under high selling pressure during the year, after the sectorsuffered from the higher supply and relative lack of demand at a time when realestate companies struggled to meet their short and medium term commitments. Thesector accounted for 44.8 percent and 34.9 percent, of the total volume andvalue of shares traded in ADX, respectively. ALDAR Properties led the marketwith 4.2bn shares changing hands at a total value of AED6.1bn (USD1.7bn).

Meanwhile,real estate sector in DFM accounted for 45.9 percent and 55.3 percent, of totalvolume and value of shares traded in the market during the year 2011,respectively. Arabtec Holding Company topped the volume leaders' list for 2011,with a total of 3.9bn shares changing hands at a total value of AED5.8bn (USD1.6bn).EMAAR Properties topped the value leaders list for the year with a 3bn shares changinghands at a total value of AED9.1bn (USD2.5bn).

Sectoral performance
Duringthe first half of 2011, The Securities and Commodities Authority (SCA) hasunified UAE sectors and reclassified the listed companies in accordance withinternational practices.

The performance of most of the sectoral indices was negative this year. Therepercussions of the economic crisis were clear on the real estate companies,which were exposed to market and operational pressures, in addition to thepressure of accumulated debts. Meanwhile, the investment industry in UAEwitnessed decline in their activities during 2011 and significant changes tocompetitive landscape. These events led to a very difficult operatingenvironment, predominantly in the brokerage business. On the other side, UAEbanks were the least affected, benefiting from the financial support providedby the government to keep running their business and away from risks.

Abu Dhabi
In ADX,all the nine sectors ended the year on a lower note, with different rates ofdecline in their indices. The real estate sector index recorded the biggest dropof 54.3 percent, on the back of the bad performance witnessed by the twoheavyweights, Aldar Properties and Sorouh Real Estate Company. The share priceof the two companies declined by 59.7 percent and 47.9 percent, respectivelyduring the year 2011, down to their lowest levels since their initial publicoffering and listing. Aldar closed at AED0.92, and Sorouh finished at AED0.85. AldarProperties announced that it has reached a AED16.8bn deal with the Abu Dhabigovernment on property sales, asset transfers and reimbursements. This liftedthe scrip during the last week of the year, which alone added 10.84 percent toits value during that week. Also the company received approval from the Securitiesand Commodities Authority on the conversion of bonds issued previously for Mubadala Development Company, at a value of AED2,106.1mn to AED1,203.5mn newshares, and to be listed in the stock market as well, increasing the company'scapital from 2,881.6mn shares to 4,085.1mn shares, resulting Mubadala Developmentshare from the company to become 49.0 percent.

In the meantime, investment sector index dropped by 33.8 percent YoY, as the shareprices of the two companies of the sector, which are Oman & EmiratesInvestment Holding and Waha Capital, declined by 30.0 percent and 27.5 percent,respectively, to reach AED0.70 and AED0.49, respectively. Meanwhile the Energysector index fell by 25.6 percent, on the back of the bad performance reportedby Abu Dhabi National Energy Company and Dana Gas, as the two companies droppedby 18.9 percent and 38.4 percent, respectively, to reach AED1.20 and AED0.45,respectively.

Somebanks enjoyed a remarkable performance during the year 2011, in contrast to themarket situation and the performance of other sectors, with the support of goodfinancial results throughout the year. The banking sector index ended the year almostunchanged (-0.04 percent). The biggest lender, the National Bank of Abu Dhabi, added11.8 percent to its value YoY, closing at AED10.95. In the meantime, Abu Dhabi Commercial Bank reported a massive increase of 34.3 percent, closing at AED2.78.On the other hand, First Gulf Bank recorded a decline of 15.3 percent, closingat AED15.45.

Dubai
In DFM , seven out of the nine sectors reportedloses at the end of 2011. Services sector index was the biggest decliner shedding70.3 percent from its value, affected by the bad performance witnessed by NationalGeneral Cooling Company's (Tabreed) share price which retreated by the same percentage,closing at AED0.50. Investment sector index came second, retreating by 35.4percent, with Dubai Financial Market share price declined by 44.4 percentclosing at AED0.84. It is worth mentioning that the company reported a 90.2percent decline in its 9M2011 net profit to AED7.6mn compared to AED77.8mn inthe corresponding period of 2010, as the constant drop in trading valuesovershadowed the company's revenue. Also, real estate sector index dipped by23.0 percent, affected by the decrease of the major share in the market, Emaar,by 27.6 percent, closing at AED2.57.

Similar to ADX, DFM banking sector recordedthe lowest decline percentage among the other sectoral indices, of 1.3 percent.Dubai Islamic Bank's share price dropped by 11.0 percent closing at AED1.94, whileCommercial Bank of Dubai lost 16.2 percent from its value, closing at AED2.90. However,Gulf Finance House recorded the biggest decline among all the stocks during2011, shedding 73.0 percent of its value, and closing at AED0.51. On the other side,an increase of 22.3 percent reported by Mashreq Bank, decreased the bankingindex' loss in 2011. The bank, which witnessed trading during 8 sessions onlythroughout the year, ended at AED101.5, and became the biggest lender in termsof market capitalization in DFM by the end of the year. Mashreq Bank announcedthat it successfully closed two syndicated facility in 2011, for Sri Lanka'slargest bank, Bank of Ceylon (BOC), one on April amounted to USD175mn and thesecond on December amounted to USD140mn. Moreover, Emirates National Bank ofDubai climbed by 6.5 percent, ending the year at AED2.94.

Telecom sector index was the sole gainer inFY2011, adding 1.0 percent to its value YoY, lifted by the increase in theshare price of Emirate Integrated Telecommunications (DU) which increased bythe same percentage, closing at AED2.89.

Market Capitalization
At theend of FY2011, total market capitalization of ADX and DFM combined reachedAED343.7bn (USD93.6bn), down by AED144.7 (USD39.4bn) YoY. Market capitalizationof ADX stood at AED232.0bn (USD63.2bn), while, market capitalization of DFMstood at AED111.7bn (USD30.4bn).

New Listing in 2011
During2011 three companies were listed in ADX, raising the number of listed companiesin the market by the end of year 2011 to 67 companies as follows:

On the first quarter of the year, Insurance House (IH) was listed within the insurance sector, to be the first listing in the UAE markets for more than two years. The company offered 55.0 percent of its shares for public subscription on February 27, as the first successful IPO in the UAE since the beginning of the financial crisis in 2008. The capital of IH is considered small; of AED120mn (120mn shares)from which the founders who are prohibited from selling their shares now own45.0 percent of it, which is equivalent to 54mn shares.

During the second quarter of the year, Eshraq Properties was the second listing in ADX this year, being the fourth company in the real estate sector. The company announced that the initial public offering (IPO), on 55 percent of thecompany's total capital (1.5bn shares), amounting to 825mn shares, was highly successful. The IPO which closed on May 11, received wide interest from companies, public entities and investors from the UAE and the GCC who recognized the valuable investment opportunity that the company's shares hold.

While in the fourth quarter, National Takaful Company was listed within the insurance sector, as the third and the last listing in the UAE markets during this year.The company offered 55 percent of its shares for public subscription in the period from April 18th to May 1st, which is 82.5mn shares out of 150mn shares (AED)which is its full capital, the shares were offered for Emirates citizens, UAE companies and foreign companies.

Delisting in 2011
On theother hand, DFM canceled the listing of two companies during year 2011 which were Grand Real Estate Projects (Grand), on August 14, and Gulf Petroleum Investment Company on October 5, as a result the number of companies listed in DFM reached62 by the end of 2011.

© Press Release 2012