Abu Dhabi shares Surge Ahead as the Banks Gain

The Abu Dhabi shares have surged to a 19-month high figure as the common perception is that the Emirate’s banks will improve their earnings. Apart from this, the equities of Abu Dhabi offer cheaper valuations when compared to the emerging market peers and the Persian Gulf – this fact helped the stocks even more.

The benchmark index of Abu Dhabi, The ADX General Index (Also known as ADSMI) has increased by 0.5% today. The index is currently at 2741.83, its highest level since June, 2011. The index has climbed up by 9.5% in last year. Incidentally, both in 2010 and 2011, the index experienced drops. The different stocks of Abu Dhabi are traded at a price to book ratio of 1.01 times. Incidentally, the same ratio for MSCI Emerging Markets Index is 1.7 times and for BGCC200 is 1.6 times.

According to the Partner at Al Fajer Securities, Nabil Farhat, the trading fundamentals are currently supporting Abu Dhabi stocks because of the fact that corporate profits are on an increasing note. Nabil added that as the valuation of Abu Dhabi stocks are on the lower side in comparison with the regional stock markets, the rally is expected to continue further, within the technical picture.

On 17th January, 2012 the Abu Dhabi stocks had a closing low of 2293.09. However, since then, the index has been able to post total gain of 19.6%. Investors still believe that after 17th January, 2012, Abu Dhabi become a bull market. Incidentally, the real estate companies and banks of Abu Dhabi are on a recovery mode from the credit crisis that these suffered. The credit crisis caused decline of property prices in UAE by 65% and almost brought Dubai to a default.

The 2nd biggest bank in UAE by assets, National Bank of Abu Dhabi is expected to post total profit of 4.1 billion dirhams. Its profits for 2011 were 3.71 billion dirhams. Today, the share prices increased by 3.6% and currently each share of National Bank of Abu Dhabi is at 11.45 dirhams. Incidentally, the bank surged ahead by 27% in 2012.

Union National Bank, on the other hand is expected to have a 300 million dirham 4th quarter net income. The share prices of the bank increased by 0.9% and are currently at 3.32 dirhams per share, marking its biggest level in 17 months.