UAE financial markets late comers to the global stock market rally
Markets and stocks undervalued in terms of earnings; book value and dividend yields
Up 20 per cent in February from a seven-year low of only mid-January 2012, the Dubai Financial Market has delivered the best performance in the world. How long this could continue?
Markets analysts are optimistic. Traders and investors hope to recover losses accumulated during the past three and half years. Some share values and portfolios have been downsized by as much as 90%. Bright perspective is much needed and warmly welcomed.
Right now, UAE stocks are still very cheap and undervalued in terms of earnings; book value and even dividend yields are on the way up. Meanwhile, cash deposits in the local banks continue to grow. Retail investors still shy from shifting chunks of their cash to the online brokerages, but they will eventually consider that a number of stocks doubled in price just over the past two months.
UAE financial markets are late comers to the global stock market rally that looks to have peaked with the Dow at 13,000.
So, one may expect the enthusiastic investors who have driven prices up since mid-January to continue pumping cash after a due correction. They are often local real estate landlords or business groups with more money than they can spend. Now they have the chance to build fundamental value portfolios by taking long positions.
In the meantime, the driver of the oil price looks relatively secure. Even without the Iranian risk premium there is a declining supply of global oil to meet rising demand. China is taking two million barrels per day more than before the financial crisis.
A major oil producer like the UAE with a highly competitive and fully diversified economy, and no net debt ought to be a no-brainer for stock investors and markets players.
So, to answer the question from a short perspective: UAE’ markets rally can continue for some three to five months with typical corrections on the way up. Traditionally slow Ramadan and August trading may provide buying opportunities for latecomers.