UAE’s undervalued markets may have bottomed out

  • Markets bounce from lows in expanding turnover
  • Fund managers see attractive valuations

After drifting lower through most of 2011, the Dubai and Abu Dhabi stock markets hit fresh multi-year lows in January, but analysts now comment that they may finally have bottomed out.

The markets have become extremely undervalued and as of now present good buying opportunities in selective stocks, despite uncertain outlooks for the United Arab Emirates’ real estate market and the global economy.

Fundamentally, most UAE companies are still weak, but this have already impacted stocks valuations during the past year, leaving no room for further declines. It is hard to imagine valuations will get to even lower compared to companies’ balance sheets.

Dubai’s index slumped to a seven-and-a-half year low last week, but has risen for six out of seven trading days since then, with trading volumes expanding. This may signal at least a short-term reversal of the downtrend.

Abu Dhabi’s market has fallen to its lowest level since March 2009, not far from the bottom reached after the global financial crisis in the fourth quarter of 2008.

Some analysts say that without clearer technical signs of a turnaround, the markets remain very risky. Technically, both the Dubai and Abu Dhabi index are in clear bearish long-term trends.

Sentiment shouldn’t be undervalued as it has proven capable of driving the markets direction during the last decade.

News this week, however, has injected more optimism into the real estate sector. Abu Dhabi said on Tuesday, it had approved a raft of projects including the delayed construction of branches of the Louvre and Guggenheim museums, after a review of development plans. This was seen as a signal that the emirate would support its state-linked enterprises.

And after markets closed on Wednesday, the Dubai Holding Commercial operations group announced the full repayment of a bond which was due Feb. 1, using its own internal cash flow.


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