Nomura upgraded targets on property firms in the United Arab Emirates on Thursday in the expectation the stabilising property market would pull stock prices out of their troughs faster than originally anticipated.
Nomura upgraded price targets of Aldar, Deyaar Development, Emaar Properties, Ras Al Khaimah properties, Sorouh Real estate, and Union Properties.
Easing liquidity conditions following reports about the upcoming $10 billion Dubai government bond programme, also boosted optimism, the bank said, adding that likely defaults of some private property developers might open the door for “vulture” investment in distressed assets.
The bond programme, launched in February, is meant to help state-linked firms. The first $10 billion tranche was sold to the central bank of the UAE, a seven-member federation including Dubai and key oil exporter Abu Dhabi.
Dubai has not said when the second tranche will be issued but a ruling council member said on Friday it could be as soon as this month.
The UAE’s six-year property boom came to a halt last year, leading to delays and cancellations of multi-billion dollar development projects.
“We forecast stabilisation in the secondary (Dubai and Abu Dhabi) property markets in Q4 2009, which we are now starting to observe. In line with our original thesis, we upgrade our target prices based on where we think we are in the cycle,” Chet Riley, Nomura’s equity strategist said in a note to clients.
“Optimism is being fuelled by a global real estate resurgence, the emergence of distressed asset funds, foreign capital inflows and a `federal fill up’ in terms of the second $10 billion tranche of the Dubai bond, which has eased temporarily liquidity concerns.”
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