Abu Dhabi’s FAB surges as it seeks more foreign investment

DUBAI • First Abu Dhabi Bank (FAB) PJSC jumped on optimism the lender will follow regional peers and raise the foreign-ownership limit on its stock.

The shares climbed in Abu Dhabi as much as 5.8%, the biggest increase since April 2017, before paring gains to 3.5% as of 12:29pm local time yesterday. The ADX General Index added 1.6%. The United Arab Emirates’ (UAE) biggest lender aims to raise the cap for foreign ownership to 40% from 25%, it said last week.

Shareholders still need to approve the change at a meeting on Feb 25. Investors from abroad held about 12% of FAB shares as of the end of last month, according to information on the stock exchange’s website.

Qatar National Bank (QNB) last year raised the ceiling for foreigners to 49% from 25%, while Dubai-based Emirates NBD PJSC plans to quadruple the limit for foreigners to 20%.

The higher cap for foreigners could allow the Abu Dhabi-based lender to earn a higher representation within emerging-markets benchmarks compiled by MSCI Inc and FTSE Russell, triggering inflows of as much as US$766 million (RM3.14 billion), according to Mohamad Al Hajj, an equities strategist at the research arm of EFGHermes Holding Co in Dubai.

Even if the percentage owned by foreigners doesn’t actually reach the expected new 40% limit, the change in the ceiling will still allow the rebalancing of weight in the benchmarks.

If the new cap is approved by the end of this month and is fully implemented before the last 10 business days of April, Al Hajj estimates US$534 million of inflows in May and US$232 million in June from MSCI and FTSE passive investors.

QNB shares advanced about 66% since it announced the intention to increase the cap for foreigners in March 2018, even though the actual ownership by investors abroad remains around 10%.

Emirates NBD’s holders approved an increase in limit last year, but the change hasn’t been implemented yet. The stock has advanced about 9% in the past year.

FAB had a weight of 0.21% in the MSCI Emerging Markets Index as of Jan 31, more than any other member from the UAE. The stock alone represents around 45% of the main gauge in Abu Dhabi.

“Judging from events so far in 2019, it seems that ADX could outperform DFM (General Index) again this year,” Al Hajj wrote in a report, with FAB set to benefit from the foreign ownership limit increase and the Abu Dhabi Commercial Bank/Union National Bank ongoing merger driving US$190 million into the stock of the new entity. Dubai’s DFM plunged 25% in 2018, while the Abu Dhabi gauge rose 12%. — Bloomberg