An index of bank stocks listed on the Dubai Financial market gained 3.25 percent in value on Thursday according to data from Thomson Reuters Eikon, pushing Dubai’s market index 1.81 percent higher.

Emirates NBD shares gained 6.15 percent and the bank was the best performer among its peers on the stock market. Ajman Bank gained 1.45 percent and Dubai Islamic Bank rose 1.13 percent.

Analysts said Emirates NBD’s shares rallied on rumours that the bank could increase its foreign ownership limit in the last quarter of the year drove the rally on the stock.

“We heard today that Emirates NBD will increase the foreigners' percentage during the last quarter of this year, which caused the 6 percent increase on the name,” Amer Saqfelhait, AVP trading manager at Al Mal Capital, told Zawya.

Emirates NBD has gained in value by 15.85 percent so far this year. According to data from Thomson Reuters’ Eikon, four analysts have a ‘strong buy’ rating on the stock, six analysts have a ‘buy’ rating and one analyst has rated it as ‘hold’.

The banking index in Dubai has dropped 0.63 percent so far in 2018, but has outperformed the wider stock market index, which has dropped 16.15 percent since the start of the year, mainly due to a retreat in real estate shares.

Neighbouring Abu Dhabi’s market has added 12.49 percent in 2018. Banks were the biggest boost for its market throughout the year, with the banking index gaining 26.28 percent so far in 2018. Abu Dhbai’s index ended Thursday’s trading 0.36 percent higher.

“We are bullish on the banking sector on both markets in Dubai and Abu Dhabi,” Saqfelhait added.

Abu Dhabi Commercial Bank (ADCB) said early in September that it had started “exploratory talks regarding a potential merger with Union National Bank”. It also added that “similar and separate discussions have also commenced with the shareholders of Al Hilal Bank.” (Read more here).

“The merger announcement between UNB and ADCB gave a very positive sentiment to the sector and we are expecting to see more mergers in the coming period. No doubts that the merger will provide more liquidity to both banks, which we are already witnessing,” Al Mal Capital’s Saqfelhait said.

As widely expected, the United States Federal Reserve raised interest rates by 25 basis points on Wednesday. The U.S. central bank still foresees another rate hike in December, three more next year, and one increase in 2020.

The United Arab Emirates central bank said on Wednesday it was raising its repo rate by 25 basis points, in line with the increase in U.S. dollar rates.

Amer Saqfelhait said the interest rate increase should “help increase the banks' profitability” in the UAE.

Elsewhere in the Gulf, Saudi Arabia’s index added 0.06 percent, Kuwait’s index gained 0.16 percent, Bahrain’s index closed 0.12 percent lower, while Qatar’s index gained 0.57 percent and Oman’s index added 0.5 percent.

A rise in oil prices to more than four-year highs has boosted most markets in the region this week, especially Saudi Arabia, which is the largest oil exporter in the world.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@thomsonreuters.com)

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