Is this a good time to buy Emaar?

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I have been asked this question a lot lately and not only by my clients but even those with a remote interest in the market.

At the risk of stating the obvious, this is a stock that has had a stellar performance for months and has attracted more and more attention lately – a 44% return Year-to-Date and an 89% return in the past one year.

Now, we have heard all kinds of reasons and justifications supporting the recent rally in Emaar’s share price. From sound fundamentals backed by the increasing recurring revenue stream to the pick-up in real estate prices, top research houses have laid out almost every argument out there that supports their increase of the stock’s target price – most have a fair value of AED6 or higher.

All that is great but these only suggest reasons for, and not drivers of, the rally by themselves. They are simply arguments justifying the run-up in the stock and, quite frankly, their validity is up for debate though there seems to be very little disagreement on that lately.

So what is it that really drives Emaar’s price or any other share price for that matter?

Like every other tradable security or commodity out there, it is and always will be supply and demand.

The question with which we began this article could be better answered by looking into the buy and sell dynamics which are at play here.

In this case, it is the actions of foreign investors that we really want to pay attention to because by and large, they have been the primary driver behind the rally in the stock since the beginning of the year, if not since before that time.

Make no mistake about it, foreign investments have been the driving force behind Emaar’s as well as the general market’s rally in Dubai and their exit will likely trigger a pull-back regardless of what we think of the company-specific fundamentals.

A case in point is last week’s two-day sell-off in the stock and the market during which we saw an exodus of foreign investments on the back of the global risk-aversion that eventually proved very short-lived.

The good news is that, right now, these foreign flows remain in favor of Emaar’ stock and until that changes, the odds are we will continue to see the share price well-supported.

*Adel Merheb is the managing partner of

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