More to this bull market than meets the eye

Adel Merheb delivers his latest assessment on what is happening on the Dubai Financial Market
More to this bull market than meets the eye
UAE stock exchange, Dubai bourse
By Adel Merheb
Mon 20 May 2013 10:47 AM

The relentless run-up we have seen in UAE equities since the beginning of the year has left most market participants mumbling about the intensity of the rise.

The speed and strength at which the local markets have rallied this year have been phenomenal and the fact that the Dubai Financial Market General Index (DFMGI) was the best performing equity index globally in the first Quarter of 2013 is evidence of that.

In the last opinion piece published on April 28, I said and I quote: “...we will all watch in awe how fast and how far this market can move up just as we did on the way down.

Since then, the market’s performance has done nothing but validate this view: There is simply more to this bull market than meets the eye.

Take the limit-up gains – the maximum gain allowed for a local stock on any given day - we saw on Aldar Properties (ALDR) and Sorouh (SOR). These are two majornames in the market and not some small-cap easily manipulated stocks.

To see them hit their one-day up limits simply reflects the broad-based interest and demand we are seeing in the local markets.

Though confident we will hear many reasons as to why the two real estate stocks have rallied the way they did, my take on their rally is very simple: A rising tide lifts all boats and in a strong bull market like the one we find ourselves in, almost every lagging stock will eventually get pushed up.

Since we all tend to get lost in the day-to-day market action, let us put things in perspective and take a look at the big picture.

When comparing the performances of Sorouh and Aldarto that of Emaar, we find that the former two are down by 60-70 percent while Emaar is up by 20 percent from their respective 2009 highs.

Granted, there could be fundamental differences that may justify the gap but in a bull market, the lines get blurred and the gaps tend to narrow. Therefore, what may seem as a stellar rally at first glance is actually nothing but a small increase in the grand scheme of things.

If you think Aldar and Sorouh’s limit-up session was an anomaly, I will urge you to think again. The way I see it, the Aldar-Sorouh development should be a reminder of how far off many, if not most, local stocks are from their 2008 levels and the material upside potential the local markets continue to offer.

* Adel Merheb is the Managing Partner of

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