Mark Mobius eyes Gulf stocks

Mark Mobius eyes Gulf stocks

3 Dec 2009, 1215 hrs IST, Bloomberg
SINGAPORE: The worst plunge in Dubai stocks in a year and record retreat for Abu Dhabi are luring Mark Mobius to “bombed out” Emaar Properties PJSC while investors say phone companies, airlines and port operators have become bargains.

Dubai isn’t likely to go bankrupt and will be “bailed out,” Mobius, who oversees more than $30 billion of developing-nation assets as chairman of Templeton Asset Management, told Bloomberg Television in Hong Kong on Wednesday. “From a longer-term perspective, you’ve got to look at these really bombed out sectors.”

Emirates Telecom, the biggest operator in the United Arab Emirates, is attractive after falling to its cheapest level since July, said hedge-fund firm Gulfmena Alternative Investments. Dubai-based courier Aramex will rally after a 7.4% drop the past two days left shares at a 32% discount to the average price-to-earnings ratio since 2006, according to Duet Mena.

Abu Dhabi’s ADX General Index sank 12% and the Dubai Financial Market Index fell 13% since Dubai said November 25 it would seek a “standstill” agreement on debt owed by state-run Dubai World. The measures are now the cheapest after Nigeria’s among 71 benchmark indexes tracked by Bloomberg. Dubai-based Emaar, the UAE’s largest developer, plunged 19%.

“I particularly like companies like Emaar, property companies,” said Mobius. “There are many of those properties that are cash-flow rich, that are doing quite well. Not all of the properties are in trouble. If you ever tried to stay at a hotel in Dubai you realise what the prices are, which should come down, but even with half the prices that they’re charging, they can make money.”

STOCKS REBOUND

Qatar’s DSM 20 Index led gains globally today, climbing 5.3%, as Commercial Bank of Qatar, the Gulf country’s second-biggest bank by assets, said it has no exposure to Dubai World or its unit Nakheel. Dubai and Abu Dhabi markets are closed until December 6 for the UAE National Day. The MSCI Emerging Markets Index rose for a third day, extending its longest rally in three weeks.

The cost of credit-default swaps protecting Dubai debt against a government default fell 9 basis points to 451, extending the steepest decline in nine months on Tuesday, according to prices from CMA Datavision. The contracts decline as perceptions of credit quality improve, with one basis point equivalent to $1,000 a year to insure $10 million of debt.

ARAMEX, AIR ARABIA

Mobius predicted on November 27 that Dubai’s attempt to delay debt payments may spur a “correction” in developing-nation equities, adding that a 20% slide is “quite possible.” “Now as the dust settles, a few companies in the UAE stand out,” said Rabih Sultani, a fund manager at Duet Mena in Dubai, a unit of Duet Group, which oversees about $2.1 billion. Sultani said he favours shares of Emirates Telecom, known as Etisalat, Aramex and Air Arabia, the UAE’s largest low-cost carrier. While Mobius expects Dubai property shares to lead a recovery, some areas in China and India may become the “next Dubai” because of too much spending and borrowing, Mobius said, citing the cities of Shanghai and Mumbai.

“It wouldn’t be a country-wide situation, isolated pockets of disaster because of over-spending and over-leveraging,” Mobius said. “It’s not going to happen tomorrow but with the kind of money supply that’s coming in, with the IPO activity that we’re seeing, that’s definitely in the cards.”

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