On March 17, Argentina’s Cristina Fernández de Kirchner, together with HE Sultan Ahmed Bin Sulayem, Chairman of DP World opened South America’s largest cruise terminal, Quinquela Martin. It was designed and will be operated by DP World, whose shares are listed at Nasdaq Dubai.
DP World shares came under pressure in February due to the civil unrest in Tunisia, Egypt and then Libya, Yemen, Bahrain and Oman, but recovered partially in March. Despite the turmoil, the emirate of Dubai is booming as it is the only globally connected metropolis in the region which provides security and free zones for all business segments. It is not facts, but emotions currently drive markets. “In the mid-term, not only in the long term, chances dominate at Middle Eastern capital markets”, says Haisam Arabi, CEO of Gulfmena Alternative Investments in Dubai. Meanwhile, DP World has recovered most of the decline from February.
The systematic risk, also known as market or beta-risk can’t be eliminated through diversification. This kind of risk is currently high throughout the Middle East, as civil unrest does not follow any rules nor does it have a timeframe (such as upcoming market regulations).
For the UAE, which has not been hit by civil unrest such as in Bahrain, Yemen or Kuwait, the systematic risk might be balanced as rising oil prices support the country’s fiscal balance. Dubai, as a safe and connected trade hub, in particular has in the past attracted investors who fled other Middle Eastern countries hit by war or social unrest. The UAE is home to 7.9% of global oil reserves. The unique risk, known as alpha-risk is different from share to share.
Other publicly listed firms at the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) are raising the UAE’s profile. Aldar Properties seems to have left its worst times behind. After it was bailed out by the Abu Dhabi government with $5.2bn, which included the purchase of key assets and Aldar’s subscription of a bond sale, the firm reported the delivery of Ikea’s store on Yas Island. “The 33,000sqm store with a total sales area of 19,150sqm will be the largest Ikea store in the Mena region and expects to serve nearly 1.3 million visitors in the first year of operations,” Aldar said in a statement on March 13. Aldar also presented the Yas developments to Russian investors at MITT Moscow, the largest travel industry fair in the country.
While Bahrain had to cancel its traditional Formula-1 Grand Prix in March, as of now nothing seems to prevent Abu Dhabi from holding the 3rd edition Etihad Airways F1- Grand Prix, scheduled for the second week of November 2011.
Despite posting a 30% profit drop in 2010, Emirates NBD’s future looks bright. The Middle East’s largest bank in relation to assets, is constantly building up its retail branch network and its private banking unit. “For Arab and expat high net worth individuals, there is no need to transfer money on Swiss accounts as we do have booking centres in Dubai, Singapore and London,” Gary Dugan, the CIO Private Banking at ENBD tells AMEinfo.com. In January, ENBD entered a partnership with The Fine Art Fund Group, London, in order to help clients to invest in paintings, sculptures and rare collections as an asset class.
Dubai Islamic Bank (DIB) is also emerging step by step from the ashes of the financial crisis. DIB has developed the first REIT in the UAE in cooperation with Eiffel management, Paris. By taking over the majority of Shariah-compliant real estate financier Tamweel in autumn last year, DIB has also revived the market for Islamic home financing. According to ENBD’s Dugan, while home and land prices in general remain under pressure in Dubai, “there is rising interest in prime locations such as Emirates Hills, Arabian Ranches and the Palm Jumeirah.”
With oil prices rising, times are tough for airliners. On March 16, Wataniya Airways from Kuwait ceased its operations and the future of the purple-painted Wataniya fleet. DFM-listed shares of budget-flyer Air Arabia, on the other hand, have been trading stable around Dhs0.80 year-to-date. The Sharjah-based carrier operates services to 67 destinations and has a reported a full-year 2010 net profit of Dhs309.559m ($84.41m), a 31% decline compared to 2009.
Meanwhile, transparency is on the rise, a long-neglected field in the GCC. In mid-March RAK Ceramics published on its annual corporate governance report where it disclosed the activity of the board of directors and their roles to serve the company’s strategy. Dr Nasser Saidi, Chief Economist of the DIFC Authority and Head of External Relations who has been promoting corporate governance (CG) in the GCC through The Institute for Corporate Governance “Hawkamah” says: “CG is important in order to increase trust among shareholder, staff, clients and stakeholder, to attract local and foreign investment and to permanently uphold international standards of transparency and integrity.”
Since its inception in 2010 Hawkamah has been on the forefront of evaluating CG progress in the GCC and in training board directors in corporate transparency and integrity.
As investors are distracted from bad news at other hot spots in the Middle East, they should not neglect good news from individual companies and should try to avoid overrating the market risk.
Tuesday, March 22- 2011 @ 16:14 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.