This article sheds light on the performance of capital markets’ constituent sectors as well as their exceptional performance witnessed by the end of the year 2013. The Dubai Financial Market General Index closed at high for 2013, up over 68%, thus topping the list of the best performing markets in the Middle East. Moreover, the total trading volume of the year surpassed that of the past three years collectively, with the market value for locally listed companies’ shares reached around Dhs 464 billion, securing a 70.45% increase.
Looking into the performance of the various sectors, we see that investment and services came out on top of the list, as it skyrocketed by 162%. It was followed by real estate with an increase of 117%, then the banking sector which rose by 74%; transportation, up by 70.50%; the industrial sector, by 61%; communications by 40%; services by 32%, and finally the energy sector, with an increase of 31.8%.
Further, the number of listed companies in 2013 reached 120. Focusing specifically on the real-estate sector, it is clear that this sector alone secured almost half of the total UAE capital market trading transactions executed during 2013. The total trading value for this sector stood at Dhs 119 billion out of a total of Dhs 244 billion, and its market value peaked at Dhs 95 billion.
This outstanding performance can be attributed to the economic recovery witnessed in this sector over the past few years, following the severe financial crisis that took away investors’ hopes during the past five years. This recovery is currently reflected in the distinguished financial performance demonstrated by real-estate companies, as it is evident that all real-estate businesses turned profitable during 2012/2013/2014. A closer look at the elements of profitability growth for this sector leads to the fact that this recovery helped those companies attract investors who are willing to invest in this market sector in the UAE, by owning residential or commercial properties. This in turn encourages real estate companies to generate new projects that cater to the increasing demand in this sector, particularly with the UAE winning the rights to host Expo 2020, which further solidified and strengthened the UAE’s position as a vital economic zone that attracts investors’ attention.
Additionally, pending projects since the previous global crisis were being completed and turned profitable. It is without doubt that the strong bond between the commercial real estate and banking sectors played a major role in such successful performance. Banks’ surplus liquidity was the main tool for refinancing major real-estate companies and opening the door for investors to benefit from banks’ offered financing opportunities.
It is also important to note that, despite the stringent international accounting standards for calculating real estate investment profits now in place for more than four years, these companies managed to develop, construct, and hand-over properties over short periods. This enabled them to recognize substantial profits in most cases, far from re-evaluating their assets. This has definitely enhanced their performance, solvency, and shareholders’ equity, which was clearly reflected in the remarkable changes in such companies’ share prices.
Recently, market performance witnessed clear fluctuation during 2014; hovering between general index increases reaching over 50%, and heavy profit taking diminished almost 70% of such increases.