2013 Offers Better Prospects for UAE, Saudi Arabia’s Financial Markets


At present, market analysts expect that in the first half o 2013, stock markets of UAE and Saudi Arabia will excel in performance compared to the financial markets in other Middle Eastern countries. These expectations are based on the steady economic growth combined with the strategic asset management and optimistic economic forecasts.

The past 2012 brought different drivers for equities in the region, though the negativity prevailed. Not very optimistic outlook for growth for the Gulf economies, the widespread global financial crisis and the escalating tensions in the region affected financial markets.

By the end of 2012, the benchmark index of Dubai climbed by over 17%, leaving behind the nearly 15% increase of Morgan Stanley’s Emerging Markets Index. Numbers show that the benchmark index of Abu Dhabi rose only by 8.8% and the Saudi index gained just 7.3%. Kuwait’s index rose by the mere 3.0% giving no signs of recovery.

In respect of this data massive equities rebound in the Gulf would look to good to be true. Though, experts share a view that in the begging of 2013 will bring good signs of recovery as sound amount of investment will pour into the market. Where this investments would come from, it is not yet very clear.

The financial markets of UAE are expected to continue with their positive performance till the last day of year on the back of 2013 forecasts.

One of the major drivers on financial level in 2012 was the revival of Dubai’s property market, which collapsed during the fourth quarter of 2008. In respond to the positive data, the shares of Dubai’s largest real estate developer – Emaar Properties rose significantly by over 4o% in 2012. This upward tendency is most likely to continue in the new year.

It is logical that property investors from the MENA region are mostly interested in Dubai’s real estate market.   It is very much likely that Dubai has learned its lesson from the past crash and regulatory efforts will help avoiding similar situation.

Real estate industry insiders expect that the fast and hasty property development in the emirate would be  replaced with more coordinated management with steady long-term development. Such new strategy won’t bring unfavorable comfort. In fact, in 2013 most areas in Dubai are expected to witness slight price and rental rises.

Other driver in support of UAE financial markets is the high dividend liquidation predicted for some stocks.

Analysts say that Air Arabia is in the top list with a 7.5% gain according to a profit dividend forecast. The forecast predicts that 5.8% would be the yield of Abu Dhabi Commercial Bank. ADCB suffered significant losses during the past 4 years, and although the bank is trying to recover it with aggressive increases in fees for retail banking and very high credit card interest rates, the perspectives are still not extremely optimistic to many traders.

Most publicly listed companies will report their annual earnings and propose dividends in the first-quarter of the new year. Therefore bullish performance of the both UAE-based financial markets, DFM and ADX, seems very much likely in the first quarter of 2013.  The market at present is not so expensive and dividend growth is up ahead.

According to expert forecasts, the DFM index now is set at approximately 9.5 times expected 2012 earnings and 8.2 times of 2013 ones. The asset division outlook is more optimistic for equities than for bonds. This is driven by the yields tightening which reduced the appetite for bonds.

Yet, the trading activity across the UAE markets is rather weak. According to analysts, the stock markets strength is not yet encouraging new IPOs.

The bourse in Dubai had trading volume of 106 billion shares back in 2009, and in 2012 only about 35 billion shares by now.

The biggest equity market in MENA, the Saudi Arabia’s Tadawul, registered trading volume of 76.7 billion shares exchanged this year. The market had some see-saw performance from an 11-month drop in November. This was in affect of larger state spending in the government budget for 2013 that should be released soon.

The basic sector for Saudi Arabia’s financial market, the banking sector,  is expected to advance steadily, supported by vivid economic recovery, housing construction and infrastructure frenzy. Portfolio managers  forecast 18% rise in Saudi banks’ profit.