Aldar Properties PJSC and Sorouh Real Estate Co. surged a fifth day, pushing Abu Dhabi’s index to the highest in almost two weeks, on bets a potential merger may bolster their businesses.
Aldar, the biggest developer in the United Arab Emirates capital, rallied 6.6 percent to 1.45 dirhams, the highest since May 15, at the 2 p.m. close in the emirate. Sorouh, the second-biggest developer, advanced 5.8 percent to 1.45 dirhams, the highest since May 4. The stocks, the most traded in the index, lifted the ADX General Index up 0.3 percent. About 95 million Aldar shares traded yesterday, the most on record.
Aldar and Sorouh, down 60 percent and 48 percent in 2011, said in a joint statement on March 11 they set up a team to study a possible merger with the “blessing” of the emirate’s government. The team will present a plan in the next three months. Government-owned Mubadala Development Co. holds 49 percent of Aldar, while the Abu Dhabi Investment Authority, a sovereign wealth fund, has a 7 percent stake in Sorouh.
“The rebound is somehow justified,” said Ahmed Talhaoui, the Abu Dhabi-based head of investment and asset management at Royal Capital PJSC. “It is not clear yet what the resulting entity will look like, growth creation may not happen quickly. Profit-taking may happen in the coming weeks.”
The U.A.E. property market is still fragile after property prices in Abu Dhabi dropped by almost half since the market’s peak in 2008 as that year’s global credit crisis forced banks to curb lending and speculators fled. Rents in the emirate will drop further in 2012 as property supply outstrips demand, according to real-estate consultant CB Richard Ellis Group Inc.
Still, Aldar and Sorouh have rebounded this year after Abu Dhabi, holder of most of the U.A.E.’s oil reserves, said it plans to resume stalled projects including branches of the Louvre and Guggenheim museums. Aldar is up 58 percent in 2012 and Sorouh has surged 71 percent in the period. In the past five trading sessions alone, both stocks soared 31 percent.