Expo 2020 success lifts DFM index

Dubai’s main stock index jumped as much as 4.2 per cent on speculation that more investment will go into infrastructure and real-estate development after the Expo 2020 win.

Dubai with host the World Expo in 2020. Karim Sahib / AFP

The Dubai Financial Market jumped as much as 4.2 per cent yesterday as investors bet on an infrastructure building boom after the emirate won the bid to host World Expo 2020.

The DFM General Index closed 1.6 per cent higher, bringing the index’s gain this year to 81 per cent. Shares of Mashreq and Dubai Investments led the gains.

"This is a very positive development for Dubai," said Fadi Al Said, the head of investments at ING Investment Management in Dubai. "It's good for the banks, for the construction and tourism industries, spending going forward and also increases the profile for the UAE as it gets included into the MSCI Emerging Markets Index next year."

Dubai, which was hit hard by a housing crash and debt crisis five years ago, won the bid to host World Expo 2020 by a resounding majority with 116 votes, ahead of Yekaterinburg, Russia, with 47.

Officials estimate staging the fair would boost the economy by US$23 billion, equivalent to about 24.4 per cent of GDP, across 2015 to 2021. Bank of America Merrill Lynch says the event would likely translate into a two percentage points lift to GDP between 2020 and 2021.

It would also help to cement Dubai’s claim as a global destination for tourism and business. The authorities forecast the expo would attract 25 million visitors over six months, while creating 277,000 jobs. Among the projects slated to be fast-tracked will be the Dh5 billion extension to the Dubai Metro’s Red Line, which will run from the existing terminal at Jebel Ali to Al Maktoum International Airport, next to the expo site. A further Dh21bn will be set aside by the Dubai Government for capital spending.

“The banks will be the best play on the Expo story,” said Simon Kitchen, chief strategist at the Cairo-based investment bank EFG-Hermes Holding. “Credit growth is already picking up as Dubai recovers from the recent slump and loan growth is likely to accelerate as Dubai prepares for the Expo by building hotels and Expo-related infrastructure.”

“The Expo, however, is still seven years away and what’s most important now is Dubai’s cyclical recovery after the 2008-09 crisis.”

Shares of Mashreq, run by the billionaire Abdul Aziz Al Ghurair, rallied 6.9 per cent to Dh89.9, while Dubai Investments, a Dubai government-owned holding company that holds stakes in dozens of diverse companies, gained 3.5 per cent to Dh2.38.

Emaar Properties, the biggest publicly traded company in the UAE, rose as much as 3.2 per cent before closing unchanged at Dh6.3. The property developer has advanced 68 per cent this year.

“The trick going forward is how to find value,” said Tariq Qaqish, head of asset management at Al Mal Capital in Dubai. “Prior to the announcement, investors were buying the whole market, but now the challenge will be to find companies with growth potential and have attractive valuations.”