Bank sees biggest one-day gain in 20 months.
Shares of Dubai Islamic Bank surged almost 15 percent on Sunday, their biggest one-day gain in almost 20 months, as investors anticipated the lender would profit by selling a stake in its property arm.
UAE markets led gains among Gulf Arab bourses, with Dubai's index posting its biggest one-day rise in almost eight months and Abu Dhabi's benchmark closing at its highest in more than five months.
Dubai's benchmark rose 3.57 percent to 3,975.60 points, powering past a resistance level at 3,900 points, said Ahmed Hamdy, senior relationship manager at Abu Dhabi-based investment bank Prime Emirates.
Dubai Islamic Bank aims to raise 3.18 billion dirhams ($866 million) by selling a 55 percent stake in Deyaar in the UAE's biggest-ever IPO, a 10-day offering that opened on Sunday.
"The gains in UAE markets today break the myth that IPOs take liquidity out of the market," said Mohammed Yasin, managing director at Emirates Securities. "Bigger investors are seeing that the markets are offering good returns," he said.
Shares of Dubai Islamic Bank surged 14.68 percent, its biggest one-day gain since Aug. 27, 2006.
"The only reason for the rise in DIB is the IPO that starts today, and 80 percent of what happened today was pure speculation on the IPO," Hamdy said.
Deyaar's chief executive told Reuters last week the firm's profits would rise by about 26 percent in 2007 and that the company would increase the value of its UAE projects five times by 2009 while expanding in the Middle East and Asia.
"DIB is going to make good money out of the Deyaar IPO and Deyaar's growth as a company. That is why we saw a good rally on the stock," said Hamood Abdulla al-Yasi, general manager at Emirates International Securities.
Property stocks in Abu Dhabi lifted the index 2.38 percent to 3,141 points, its highest close since Nov. 19.
Aldar Properties, the second-largest UAE developer by market value, jumped 8.32 percent. The stock is up 41.7 percent since the company said on Feb. 17 that it would allow foreigners to buy its shares.
Sorouh Real Estate, which announced a similar plan the following month, rallied 7.48 percent.
"There are large buying orders in both Aldar and Sorouh. We have seen large foreign buying orders," said Alaa El Din Moustafa, chief dealer at EFG-Hermes.
Qatar's index rose for a seventh trading day while Bahrain's posted gains for a third day and Oman's bourse fell after three days of gains.
Saudi Arabia's main index extended declines into a third trading day as investors sold shares to subscribe to Saudi Kayan Petrochemical Co.'s initial public offering, which closes on Monday.
The index, the worst-performer in the Gulf this year, closed down 0.1 percent at 7,319.82 points, having fallen almost 3 percent on Saturday.
"Quite a lot of people wait until the end of IPOs to subscribe," said Khan Zahid, chief economist at Riyad Bank. "The index will pull back again once the IPO closes."
Kuwait's index also closed slightly lower, snapping a five-day rally. It fell 0.02 percent to 10,932.20 points.
Mobile Telecommunications Co. which is up more than 70 percent this year, lost 2.05 percent.
"There is profit-taking across the board," said Jassem al-Zeraei, a trader at the National Bank of Kuwait.
Bucking the downtrend trend, Commercial Bank of Kuwait surged 6.41 percent to a record close, extending gains this month to 25.7 percent.
News reports that a Qatari lender is in talks to buy a stake in the bank have fuelled the rally, Zeraei said.
"There is no way that the volumes [in CBK] indicate retail investment," Zeraei said. "There is something bigger cooking in the background that we don't know about."