Top Dubai Stock Needs to Reveal Its Turnaround Plan, NBAD Says

  • Volatility in Shuaa Capital shares seen remaining high
  • Best stock this year among 36 members of Dubai benchmark

Sharp swings in shares of Shuaa Capital are likely to persist as investors wait for the Dubai-based investment bank’s new shareholder to present its turnaround strategy for the company, said NBAD Securities.

Historical volatility in Shuaa stock reached a 23-month high on Dec. 4, data compiled by Bloomberg show. Speculation among investors has increased that the Abu Dhabi Financial Group, which bought a 48 percent stake in June, will set out plans for how it will stem losses at the company. The stock has more than tripled in value this year.

“Volatility is going to prevail over stock performance for a while longer,” said Sanyalak Manibhandu, head of research at NBAD Securities, the second-biggest Dubai brokerage by value of stocks traded. “The incoming major shareholder should make a statement on business strategy, to allow the market to assess the direction and impute a more informed value to Shuaa stock.”

In June, Shuaa’s biggest shareholder, the Dubai Banking Group, agreed to sell its 48.36 percent stake to Abu Dhabi Financial Group for $93 million. Two months later, ADFG Chief Executive Officer Jassim Alseddiqi said the firm would effect a “massive turnaround” at Shuaa. Alseddiqi was last month month named chairman of Shuaa, which posted a loss of 35.3 million dirhams ($10 million) in the third quarter.

Shuaa has surged 262 percent this year, the most among the 36 members of Dubai’s main stock gauge. The stock dropped 3.9 percent Tuesday after climbing 9.3 percent the previous session. Sixty-day historical volatility was 76, down from the almost two-year high reached Sunday.

“I see the trading focus shifting increasingly into dividend plays in the rest of the fourth quarter and into the first quarter of 2017,” Sanyalak said. “So there is a risk to traders coming in at current levels, in the event market rotation deflates volume in Shuaa in favor of dividend plays. Shuaa is loss-making and is not a dividend play.”

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