Dubai, Turkey stocks surge on Iran nuclear deal

London

EMERGING-MARKET stocks from Dubai to Turkey best-positioned to profit from an end to sanctions on Iran surged after Teheran concluded a nuclear deal with world powers.

Dubai's DP World Ltd, which operates the Persian Gulf's biggest port, rose the most since May, taking a four-day gain to 6.7 per cent. Property companies and banks in the emirate also jumped.

Iran and six global powers sealed the accord to curb the country's nuclear programme in return for ending penalties, unlocking one of the world's most shut-off markets and the region's second-biggest economy. The deal comes as companies face slower growth in Europe and China.

The deal is "bad for oil and related markets, and rather good for those interested in investing in quite possibly the most interesting market in the world", said Emad Mostaque, a London-based strategist at emerging-market consultancy Ecstrat.

Lower oil prices "will put real pressure on energy equities" as "the near-term impact of floating Iranian barrels and medium-term impact of increased Iranian production is absorbed by the market", he added.

"Iran is the largest and most important economy in our view that is still closed to institutional investors," Charles Robertson and Daniel Salter of Renaissance Capital in London wrote in a report this week. The "deal would create some structural underpin for the Turkish story, as Turkish companies exploit the renewed export opportunity".

The agreement will enable Iran to restore about 500,000 barrels a day by mid-2016 and an additional 500,000 a day by the end of next year, according to Commerzbank. Oversupply may weigh on energy stocks including CNOOC and China Petroleum and Chemical Corp, Mr Mostaque said. CNOOC on Tuesday fell the most in almost a week in Hong Kong and added 0.4 per cent on Wednesday.

In Dubai, developer of the tallest tower in the world, Emaar Properties PJSC, closed at the highest level since June 25. Damac Properties Dubai Co, another property company, rose one per cent. Dubai Islamic Bank PJSC, the sheikhdom's biggest lender that complies with Syariah law, climbed to the highest level this year.

If trade between Dubai and Iran reverts to the level seen before the sanctions, the city could get a 5 per cent boost to its nominal gross domestic product over time, according to Hasnain Malik, the head of frontier-markets equity strategy at Exotix Partners LLP in Dubai.

"Banks and real-estate companies could see a commensurate impact in terms of value of deposits or trade finance and property purchases," Mr Malik said in April.

The United Arab Emirates and Turkey are best-positioned to benefit from potential upside in Iranian trade volumes, analysts at Bank of America Merrill Lynch including Turker Hamzaoglu in London said in a note.

"Turkish and Middle East and North Africa banks are sectors that have medium to long-term potential upside. Still, sustaining any boost in activity would require Iranian macro reforms," they said. WP