Abu Dhabi Stocks Rise Most in Mideast Boosted by FAB: Inside EM

Abu Dhabi’s main equities index rose the most in the Middle East, boosted by gains in the United Arab Emirate’s biggest lender as investors in the region extend a rotation from cyclicals to value.

The ADX General Index gained as much as 1.4%, withFirst Abu Dhabi Bank PJSC climbing as much as 3.4% to the highest price since early March. The bank has a weight of near 40% in the index. Benchmarks in Dubai, Saudi Arabia and Oman also rose, while those in Kuwait, Bahrain and Qatar fell.

FAB’s outperformance could be linked to “a cyclical/value recovery post the vaccine news, with much more news on a vaccine to come,” according to Divye Arora, a portfolio manager at Daman Investments in Dubai. “It is the safest name amongst UAE banks with better asset quality, lowest cost of risk and relatively higher public and public sector related entities exposure.”

The stock is “looking attractive” versus regional players when looking at a price-to-book basis, according to Harshjit Oza, the head of research at Shuaa Securities. “Also, one third of their lending is to government and government-related entities, so overall cost of risk and higher provisioning concern going forward are limited.”

HIGHLIGHTS
  • MSCI Emerging Markets Index rose 1% last week, the sixth weekly advance out of seven weeks since Sept. 25
  • EM REVIEW:Vaccine-Led Rally Eases as Infection Numbers Surge
  • MORE:Saudi Debt Beats Peers for Now as Bond Traders Brace for Biden

MIDDLE EASTERN MARKETS:

  • Saudi Arabia’s Tadawul All Share Index rises 0.5% as of 10:49 a.m. local time, with an index tracking 12 lenders in the country up 0.4%
    • A “fast-recovery scenario” suggests 11% earnings upside for Saudi banks in 2020-21, according to Edmond Christou, an analyst at Bloomberg Intelligence
      • “A stronger economy could support a recovery in Saudi bank earnings, we believe, with consensus for both 2020-21 subject to 11% upward revisions on lower cost-of-risk provisioning and better revenue,” Christou wrote in a note
      • “These are investors realizing gains well before the inclusion, justified by them seeing the market already peaked,” said Noaman Khalid, associate director of indices macroeconomics and strategy at Arqaal Capital

        • “Macro fundamentals justify this to certain extent with oil prices extremely weak, second wave of Covid that could be followed by another wave of lockdowns all put pressure on market.”

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