UAE markets also expected to recover amid Abu Dhabi stimulus plan and a more favourable global market background, as geopolitical risks subside and interest rates remain steady
The report expects that UAE equity markets will rally in 2019, boosted by a weaker dollar, higher oil prices and Abu Dhabi’s economic stimulus plan. With the world’s biggest economies continuing to post good growth, gains are also expected in global stock benchmarks. This will further aid local markets following the MSCI EM inclusion of Saudi Arabia and the JP Morgan indices inclusion of GCC bonds into their index.
“We predict a banner year for the UAE,” said Alain Marckus, Managing Director and Head of Investment Strategy and Investment Management for Global Asset Management at FAB. “A less hawkish Fed, a weakening dollar, and Expo2020 – all of these factors suggest a bullish Dubai. The Emirate will also benefit from the AED 50 billion stimulus package set to be rolled out by Abu Dhabi this year. Valuations, fundamentals and mean reversion – all are set to favour the UAE this year.”
He added: “2018 was a volatile year for global markets. 2019, is expected to deliver good, steady returns. The US economy is growing at an above-average rate since the global financial crisis of 2008 with monetary policy still favorable. All of this means 2019 looks a lot brighter. The major shift in this year’s outlook is that we are less constructive on the US Dollar and expect the currency to weaken. As a result, we are anticipating good returns from emerging markets in 2019, including the Middle East, as they benefit from a weaker dollar.”
The price of oil, which fell nearly 20% last year and averaged $72 a barrel, is likely to recover to that higher range in 2019, as the US dollar gives up some of its gains.
Nevertheless, the report warns that as interest rates rise following a decade of exceptionally low rates, the volatility experienced by markets in 2018 is likely to continue as some of the world’s major central banks roll back stimulus plans and raise rates. Increased volatility will however provide good investment opportunities for the nimble.
The Global Investment Outlook report remains bullish on US stocks, which are expected to be buoyed by the country’s continued stronger economic growth. President Trumps pro economic policies along with trade realignment will continue and FAB’s specialists expect a similar outcome for the stock market in 2019.
The report strikes a more cautious tone on European equities, as Brexit woes and other regional issues weigh on investor sentiment. Meanwhile, the authors of the report favour commodities and are positive on emerging market equities. This is especially the case for China, where the economy is growing at 6%, a rate twice that of the US economy, despite being the slowest rate of growth in 30 years.