Aldar Properties and Sorouh Real Estate shares rose more than 14 per cent to touch their maximum price ceiling yesterday as volumes more than tripled amid investor speculation that shares post-merger will trade at a premium.
The trading bonanza helped to boost the Abu Dhabi Securities Exchange to its highest level since October 2008.
Aldar, which is expected to complete its merger with Sorouh next month, jumped 14.7 per cent to close at Dh1.95, the highest level since January 2011. Traded volumes were 3.3 times their three- month daily average, according to Bloomberg data.
Sorouh's shares rocketed 14.9 per cent to close at Dh2.46, the highest level since April 2010. Volumes were 3.5 times the three- month daily average.
The ADX General Index gained 1.4 per cent to close at 3,564.20 points, the highest level since October 2008. Buying activity on the two companies helped boost traded value on the Abu Dhabi bourse to Dh892.1 million.
"In the last four years, we haven't seen fresh money go into the market in May as we enter June," said Mohammed Al Murtada Al Dandashi, the managing director at Al Ramz Securities in Abu Dhabi.
"There is good demand. It's a reflection of the positive sentiment in the market."
A wide spectrum of investors were doing the buying, amid bets that AldarSorouh will trade above Dh2 post-merger, Mr Al Dandashi said.
"Traders and retails who are trying to make a quick profit" were making the purchases, he added.
The shares were also regarded as undervalued, as investors looked for laggards amid a recent bull run for Dubai companies such as Emaar Properties, Dubai Islamic Bank and Drake & Scull International, Mr Al Dandashi said.
Aldar is trading below book value. "Last week it was trading 0.7 times book. It has now caught up to about 0.8 times to 0.85 times," Mr Al Dandashi said.
Others attributed the surge in interest on expectations of a "mega project" award in Abu Dhabi, said Wadah Al Taha, the chief investment officer at Al Zarooni Group.
"There is speculation brewing that the new entity … [will benefit from] Abu Dhabi's strategy and the upcoming Dh330 billion that will be spent on infrastructure projects," Mr Al Taha said. "AldarSorouh will be the biggest entity and developer in the capital and a direct recipient of the contracts."
Shares in developers have risen dramatically after the long-awaited merger between the two companies was announced in March, leaving the new company as the only major listed property company in Abu Dhabi and in a prime position to win new government work.
At the time the merger agreement was signed Sorouh announced it had received Dh3.2bn from the Abu Dhabi Government for sales of apartments at the Gate scheme on Reem Island and other infrastructure. Aldar also sold billions of dirhams of assets to the Government during the global financial crisis.
Both companies declined to comment.