Shares in Dubai Investments Co , a conglomerate with interests ranging from glass-making to edible oils and Islamic reinsurance, have more than doubled this year. But the rise has little to do with its business in those sectors.
Instead, investors are hoping Dubai will win the right to host the World Expo in 2020. Dubai Investments owns Dubai Investments Park, a big mixed-use real estate development next to the proposed Expo location, as well as land nearby.
The Expo may make the company's real estate holdings a lot more profitable in coming years - if, that is, Dubai gets to host the event.
Two months ahead of an international vote which will decide that question, Dubai's stock speculators are betting on the outcome. But it is by no means clear that the Expo can deliver as much of a boost to share prices as they are anticipating.
"The market has already gone up massively this year, including many of the companies that could benefit from the Expo," said Ali Adou, portfolio manager at The National Investor, an Abu Dhabi investment firm.
"There will be upside going forward, but it will be limited for the short term. In the medium term, you have to position yourself anyway for the new economic growth cycle in Dubai and Abu Dhabi."
Dubai is competing with Izmir in Turkey, Sao Paulo in Brazil and Yekaterinburg in Russia for the right to host the 2020 world's fair. A vote of the 166 member states of the Paris-based Bureau International des Expositions is expected to choose between them at an assembly on Nov. 26-27.
Backed by a glitzy public relations campaign and counting on its status as an international hub with close business and transport links to several continents, Dubai may well be the front-runner.
Hosting the six-month Expo could help to justify and accelerate some of the big infrastructure projects which the government of Sheikh Mohammed bin Rashid al-Maktoum plans for coming years.
The government cites a report by consultancy Oxford Economics which estimates the event would attract 25 million visitors and create about 277,000 jobs - big numbers for an emirate with a current population of 2.2 million.
Dubai's Expo site would lie between its Jebel Ali port and its new Al Maktoum International Airport, where the first passenger terminal is to start operating later this year. Officials have said a planned 5 billion dirham ($1.4 billion) extension of Dubai's metro system to the airport area will be accelerated if Dubai wins the Expo.
The Expo could help to shift more of Dubai's economic activity to the emirate's south; currently much of the economy is focused on the financial zone and heavily populated areas further north.
That could boost demand for Dubai Investments' land holdings as well as its residential and commercial developments in the area. Its shares are up 121 percent year-to-date, outperforming a 67 percent gain by the overall stock market index.
Other potential Expo plays include budget carrier Air Arabia , the only listed airline in the United Arab Emirates, which is up 63 percent year-to-date. Construction firm Arabtec and engineering company Drake and Scull could be expected to win some construction work for the Expo.
Port operator DP World, which runs Jebel Ali port, would handle many of the imports of construction materials and machinery for buildings and infrastructure at the 438-hectare Expo site. Its shares, up 36 percent this year, are lagging the stock market because of tough global conditions in the port industry.
Giant real estate developer Emaar Properties would benefit from the Expo because of its growing interests in the retail, hotel and tourism sectors, which would serve visitors to Dubai.
It is less clear, however, that Dubai winning the Expo would make much long-term difference to share prices - even the prices of companies that would be directly involved in the project.
While infrastructure and jobs created for the Expo would enrich Dubai, and the emirate's image as a global city would benefit, the visitors themselves would not start arriving for seven years - far beyond the time horizon of most equity investors.
So even if there is a knee-jerk jump in share prices after the Bureau International des Expositions makes its decision in November, it may prove short-lived.
Qatar's stock market rose 16 percent in the four months before it was awarded the right to host the 2022 soccer World Cup at the start of December 2010, and gained as much as 14 percent more in subsequent weeks.
But it then gave up much of those gains and essentially moved sideways for the next two years, as investors realised infrastructure building contracts to prepare for the World Cup would not be awarded immediately, and that the tiny state faced big logistical challenges in staging the event.
Factors other than the Expo, such as Dubai's efforts to develop its financial centre, attract foreign investment in its service and light industrial sectors, and prevent another boom-and-bust cycle in its real estate market, are likely to have much more of an impact on the emirate's economy in coming years.
Mohammed Ali Yasin, managing director of Abu Dhabi Financial Services, said a recovery of Dubai's stock market from the debt crisis of 2008-2011 would continue even if the emirate didn't win the Expo - the trend would simply be drawn out over a longer time frame if the bid failed.
"Some of the very optimistic investors will hold positions through the volatility, but if Dubai doesn't win, we will see heavy selling pressure" in the short term, he said.
There is also concern that some of Dubai's smaller Expo-related stocks, which can easily be moved around by retail investors, have already risen to levels where they are fully valued by most measures, making big, further gains difficult.
Dubai Investments, for example, is trading at about 15.6 times last year's earnings, in line with the whole Dubai market. That level compares with about 13 times for the MSCI Emerging Markets Index.
The history of share prices in Shanghai, which hosted the World Expo in 2010, suggests that if Dubai's Expo bid is successful, there will be heavy speculation in Expo-related stocks in the year before the event is actually held. But any gains then may also prove temporary.
Shanghai International Airport jumped 55 percent in 2009 while Shanghai Zhangjiang Hi-Tech Park Development Co , a property developer based near the city's Expo site, gained 29 percent.
By the end of 2010, however, when the 73 million visitors to the Shanghai Expo had gone home, the stock prices of both companies had fallen back to their pre-Expo levels.For all the latest market news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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