Goldman Sachs’s resurgent interest in Dubai property plays down bubble fears

The US investment bank has restarted coverage of Dubai’s publicly-listed property firms. It believes that worries over the emirate’s property bubble have been overdone amid a series of regulatory curbs against speculation.

Goldman Sachs has restarted coverage of Dubai’s publicly-listed property firms. Ali Haider / EPA

Goldman Sachs' renewed interest in the UAE's equity markets and Dubai property stocks is creating a buzz.
On Monday the US investment bank restarted coverage of Dubai's publicly-listed property firms. It believes that worries over the emirate's property bubble have been overdone amid a series of regulatory curbs against speculation.
That Goldman Sachs has a view on this is notable and underscores how the 79 per cent surge in Dubai stocks this year and the property market's rapid rebound have not escaped international investors' notice.
Indeed, the UAE's share markets rally has dramatically improved the fortunes of the brokerage industry, which had been consolidating and restructuring following the global financial crisis.
"Prior to 2008, everybody covered the country. But after the crisis, nobody was seriously covering it," said Fathi Ben Grira, the chief executive of Mena Corp, an Abu Dhabi-based investment firm. "All the research teams were scrapped except in select regional banks. But the major international banks had limited coverage, arguably a few stocks.
"The fact that a big name like Goldman is looking at the fundamentals of the UAE is a positive signal. They usually don't do it for free. They must have some expectations for future business in the country."
Shares listed on the Abu Dhabi Securities Exchange and Dubai Financial Market have rallied this year, reversing recent years' losses amid a recovery in the banking and property sectors.
Mohammed Ali Yasin, the managing director at National Bank of Abu Dhabi's brokerage arm, said: "The report from Goldman Sachs tells me there's a lot of international interest in the UAE equity market which we lost in the last three years. They are reacting to their clients' demands for information and access to the local bourses."
Following the establishment of Dubai's financial free zone, western lenders flocked to the emirate to capitalise on a flurry of deals such as taking companies public to advising on sovereign fund mandates.
But the global financial crisis cut access to credit in the emirate, triggering a major sell-off across Dubai's banking and property sectors.
From 2005 to 2011, the emirate's index lost more than 80 per cent of its value. Traded value on the UAE markets also dropped from Dh537 billion in 2005 to a trough of Dh57bn.
Investment banks, whose key businesses include equity research and brokerage services, were forced to rethink their business presence, leading to retrenchments and the closure of their loss-making divisions.
Indeed, as market liquidity dried up in the UAE, HSBC decided to shut its local brokerage and service its institutional clients through its global hub. Its decision was significant to the industry as it was the first international bank to secure a licence to trade on the local bourses.
There are currently 47 equity brokerages operating in the UAE, down from 110 in 2010, according to the website of the financial regulator.
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